2022 AQA AS-Level Economics 7135 模擬試題連答案詳解

An outward shift in the PPF represents an increase in the productive capacity (potential output) of the economy. This is caused by an increase in either the quality or quantity of the factors of production. Investment in new technology improves the quality/productivity of capital, and an increase in the size of the working-age population increases the quantity of labor available, thus shifting the PPF outwards. Option b represents a movement from a point inside the PPF to a point closer to the frontier (actual economic growth, not potential). Option c is a movement along the PPF. Option d represents nominal financial changes that do not alter physical productive capacity.

1 mark for the correct option (a). No partial marks are available.

The incidence of an indirect tax depends on the relative price elasticities of demand and supply. Since the absolute value of the price elasticity of demand (\(|PED| = 0.8\)) is less than the price elasticity of supply (\(PES = 1.2\)), demand is relatively more price inelastic than supply. This means consumers are less responsive to price changes than producers, and therefore consumers will bear the larger share of the tax burden. Option b is incorrect because a more elastic supply means the producer can easily pass on the tax burden, bearing less of it. Options c and d are incorrect based on the specific elasticity values given.

1 mark for the correct option (a). No partial marks are available.

First, find the Fixed Cost (FC) of production. At 0 units of output, Total Cost (TC) is £60. Since there is no variable production, this represents the total Fixed Cost (FC = £60). Next, find the Total Variable Cost (TVC) at 30 units of output: TVC = TC - FC = £210 - £60 = £150. Finally, calculate the Average Variable Cost (AVC) at 30 units of output: AVC = TVC / Output = £150 / 30 = £5.00. £2.00 is the Average Fixed Cost (£60 / 30). £6.00 is the Marginal Cost of the 30th unit (calculated as (£210 - £150) / 10). £7.00 is the Average Total Cost (£210 / 30).

1 mark for the correct option (b). No partial marks are available.

A pure public good is characterized by non-excludability and non-rivalry. Non-excludability means that once the good is provided, it is impossible to prevent individuals who have not paid for it from consuming it (the free-rider problem). Consequently, private firms cannot charge a price and make a profit, leading to complete market failure where the good is not provided at all by the free market. Option b defines rivalry incorrectly. Option c is incorrect because public/merit goods generate positive externalities, meaning social benefits exceed private benefits. Option d describes a club/quasi-public good.

1 mark for the correct option (a). No partial marks are available.

The five-firm concentration ratio measures the combined market share of the five largest firms in the industry. First, calculate total market sales: Total Sales = 120 + 90 + 75 + 65 + 50 + 100 = 500 million. Second, sum the sales of the five largest firms (Firms A, B, C, D, and E): Sales of top 5 = 120 + 90 + 75 + 65 + 50 = 400 million. Third, calculate the concentration ratio: Five-firm concentration ratio = (400 / 500) * 100 = 80%. Option a is the three-firm concentration ratio (57%). Option b is the four-firm concentration ratio (70%).

1 mark for the correct option (c). No partial marks are available.

First, calculate the Real GDP for each year using the formula: Real GDP = (Nominal GDP / GDP Deflator) * 100. Real GDP in 2021: (200 / 100) * 100 = 200 billion. Real GDP in 2022: (231 / 110) * 100 = 210 billion. Next, calculate the percentage change in Real GDP from 2021 to 2022: Percentage Change = ((210 - 200) / 200) * 100 = 5.0%. Option c is the percentage change in Nominal GDP (15.5%).

1 mark for the correct option (a). No partial marks are available.

In the circular flow of income, injections are I (investment), G (government spending), and X (exports). Withdrawals (leakages) are S (savings), T (taxation), and M (imports). A net injection occurs when there is a change that shifts the balance toward injections exceeding withdrawals (J > W), which expands national income. An increase in government spending (G, an injection) coupled with a decrease in taxation (T, a withdrawal) will unambiguously increase injections relative to withdrawals, constituting a net injection. Option b represents an increase in withdrawals and a decrease in injections. Option c has a net-zero effect on the flow. Option d includes a decrease in injections (G) and a decrease in withdrawals (M), which does not guarantee a net injection.

1 mark for the correct option (a). No partial marks are available.

Cyclical (demand-deficient) unemployment occurs when there is a lack of aggregate demand in the economy, such as during a recession. To reduce cyclical unemployment, policy must aim to stimulate aggregate demand. Expansionary monetary policy (such as lowering interest rates or quantitative easing) reduces the cost of borrowing and encourages consumption and investment, shifting the AD curve to the right and reducing cyclical unemployment. Structural, frictional, and seasonal unemployment are not directly caused by fluctuations in the economic cycle / aggregate demand and require supply-side policies.

1 mark for the correct option (a). No partial marks are available.

A normative statement contains a value judgement and cannot be proven or disproven by looking at empirical evidence. The statement in option B uses the value-laden word 'should' and makes a value judgement about fairness, which makes it normative. The other statements are positive because they can be tested against real-world data or describe cause-and-effect relationships without subjective value judgements.

1 mark for the correct answer B. 0 marks for incorrect options.

Cross elasticity of demand (XED) is calculated as the percentage change in quantity demanded of Good Y divided by the percentage change in price of Good X. Here, \(\text{XED} = \frac{+3\%}{+12\%} = +0.25\). A positive XED indicates that the goods are substitutes, as consumers switch away from the more expensive public transport to bicycles.

1 mark for correct calculation of +0.25 and identifying the relationship as substitutes (Option A). 0 marks for any other option.

Public goods are defined by two key characteristics: non-excludability (it is impossible to prevent non-payers from consuming the good) and non-rivalry (consumption by one person does not reduce the amount available for others). Option A refers to merit goods or public provision, Option C describes a common resource, and Option D describes a merit good.

1 mark for the correct answer B. 0 marks for incorrect options.

Total Cost (TC) is the sum of Total Fixed Cost (TFC) and Total Variable Cost (TVC). Given TC = £5,000 and TFC = £2,000, the TVC = £5,000 - £2,000 = £3,000. Average Variable Cost (AVC) is TVC divided by output: £3,000 / 100 = £30.

1 mark for the correct calculation of £30 (Option B). 0 marks for other options.

An oligopoly is characterised by high market concentration and mutual interdependence. Because there are only a few dominant firms, each firm must consider the potential reactions of its competitors when making decisions about pricing, output, or advertising. Options A and B are features of perfect competition, while Option D is generally not achieved by oligopolistic firms.

1 mark for the correct answer C. 0 marks for incorrect options.

A major difference between CPI and RPI is the mathematical formula used to aggregate prices. CPI uses a geometric mean, which accounts for substitution behaviour (when a price rises, consumers switch to cheaper alternatives), whereas RPI uses an arithmetic mean. Additionally, RPI includes mortgage interest payments and council tax, which are excluded from the CPI.

1 mark for the correct answer B. 0 marks for incorrect options.

In a simplified closed economy with no government, there are only households and firms. The only leakage (withdrawal) from the circular flow is Savings, and the only injection is Investment. Equilibrium is reached when leakages equal injections, which is \(S = I\). Option D represents the equilibrium condition for an open economy with government intervention.

1 mark for the correct answer A. 0 marks for incorrect options.

A negative output gap occurs when actual GDP is less than potential GDP. This means the economy is operating below its full productive capacity, leading to spare capacity, idle resources, and cyclical unemployment. Inflationary pressures are typically low during a negative output gap.

1 mark for the correct answer B. 0 marks for incorrect options.

When the demand for a good is highly price inelastic, consumers are relatively unresponsive to changes in price. An indirect tax shifts the market supply curve upwards and to the left. Since demand is inelastic, this leads to a relatively small percentage decrease in quantity demanded but a large percentage increase in the market price. Because the quantity consumed remains high and the tax per unit is added, the government will collect a substantial amount of tax revenue, while the corrective effect on consumption (and therefore the external cost) will be relatively small. Thus, option B is correct.

1 mark for the correct answer B. 0 marks for incorrect options.

First, calculate the total cost at \( 100 \) units. Total Variable Cost (TVC) is Average Variable Cost multiplied by quantity: \( \text{TVC} = £5 \times 100 = £500 \). Total Cost (TC) is Total Fixed Cost (TFC) plus TVC: \( \text{TC}_{100} = £1,000 + £500 = £1,500 \). Next, we are given that at \( 101 \) units, \( \text{TC}_{101} = £1,520 \). Marginal cost (MC) is the change in total cost from producing one additional unit: \( \text{MC} = \text{TC}_{101} - \text{TC}_{100} = £1,520 - £1,500 = £20 \). Therefore, C is the correct answer.

1 mark for the correct calculation leading to option C. 0 marks for other options.

Under Keynesian theory, when there is substantial spare capacity in the economy, the LRAS curve is perfectly horizontal (elastic). This is because unemployed resources (labor and capital) can be brought into production without putting upward pressure on wages or prices. Consequently, an increase in aggregate demand (AD shifting to the right) will lead to an increase in real national output but the price level will remain constant. Thus, B is the correct answer.

1 mark for identifying option B as the correct macroeconomic outcome under the given Keynesian LRAS condition. 0 marks for other options.

A rise in productivity in domestic manufacturing means that firms can produce goods more efficiently, reducing their unit costs of production. This makes domestic exports more price-competitive abroad and domestic goods more competitive relative to foreign imports in the home market. As a result, export volumes should rise and import volumes should fall, leading to an improvement (narrowing) of the current account deficit. Thus, D is the correct answer.

1 mark for the correct answer D. 0 marks for incorrect options.

External costs (or negative externalities) are the negative spillover effects imposed on third parties who are not involved in the consumption or production decisions of a good or service. They occur when social costs exceed private costs. For example, a chemical factory discharging toxic waste into a local river imposes external costs on local residents and fishermen who suffer from pollution and reduced fish stocks, without being compensated. Formula: External Costs = Marginal Social Cost (MSC) - Marginal Private Cost (MPC).

3 marks: For a clear, precise and complete definition of external costs, acknowledging negative spillover effects on third parties outside the market transaction. 2 marks: For a partially complete definition that shows a good understanding, such as defining them simply as costs to third parties, or providing the correct formula (MSC - MPC) with a basic verbal explanation. 1 mark: For some limited understanding of the term, e.g., stating they are negative effects or just giving an example like pollution without explaining the concept.

To calculate the percentage change in real GDP, we must first convert the nominal GDP values into real GDP values using the GDP deflator formula:

$$\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{GDP Deflator}} \times 100$$

**Step 1: Calculate Real GDP for 2022**
$$\text{Real GDP}_{2022} = \frac{\pounds440.0\text{ billion}}{110.0} \times 100 = \pounds400.0\text{ billion}$$

**Step 2: Calculate Real GDP for 2023**
$$\text{Real GDP}_{2023} = \frac{\pounds472.5\text{ billion}}{112.5} \times 100 = \pounds420.0\text{ billion}$$

**Step 3: Calculate the percentage change in Real GDP from 2022 to 2023**
$$\text{Percentage Change} = \frac{\text{Real GDP}_{2023} - \text{Real GDP}_{2022}}{\text{Real GDP}_{2022}} \times 100$$
$$\text{Percentage Change} = \frac{420.0 - 400.0}{400.0} \times 100 = \frac{20.0}{400.0} \times 100 = 5.00\%$$

For the correct answer of **5%** or **5.00%** (with or without % sign): **4 marks**.

If the final answer is incorrect, method marks can be awarded as follows:
- **1 mark** for calculating Real GDP in 2022 as \pounds400 billion.
- **1 mark** for calculating Real GDP in 2023 as \pounds420 billion.
- **1 mark** for showing the correct formula for percentage change: \(\frac{\text{New Value} - \text{Old Value}}{\text{Old Value}} \times 100\).

*Maximum of 3 marks if the final calculation is incorrect.*

To calculate the percentage change in real GDP, we must first convert the nominal GDP values into real GDP values using the GDP deflator formula:

$$\text{Real GDP} = \frac{\text{Nominal GDP}}{\text{GDP Deflator}} \times 100$$

**Step 1: Calculate Real GDP for 2022**
$$\text{Real GDP}_{2022} = \frac{\pounds440.0\text{ billion}}{110.0} \times 100 = \pounds400.0\text{ billion}$$

**Step 2: Calculate Real GDP for 2023**
$$\text{Real GDP}_{2023} = \frac{\pounds472.5\text{ billion}}{112.5} \times 100 = \pounds420.0\text{ billion}$$

**Step 3: Calculate the percentage change in Real GDP from 2022 to 2023**
$$\text{Percentage Change} = \frac{\text{Real GDP}_{2023} - \text{Real GDP}_{2022}}{\text{Real GDP}_{2022}} \times 100$$
$$\text{Percentage Change} = \frac{420.0 - 400.0}{400.0} \times 100 = \frac{20.0}{400.0} \times 100 = 5.00\%$$

For the correct answer of **5%** or **5.00%** (with or without % sign): **4 marks**.

If the final answer is incorrect, method marks can be awarded as follows:
- **1 mark** for calculating Real GDP in 2022 as \pounds400 billion.
- **1 mark** for calculating Real GDP in 2023 as \pounds420 billion.
- **1 mark** for showing the correct formula for percentage change: \(\frac{\text{New Value} - \text{Old Value}}{\text{Old Value}} \times 100\).

*Maximum of 3 marks if the final calculation is incorrect.*

Here are three valid points of comparison from the data:

- **Comparison 1**: Bexton's unemployment rate was higher than Arland's in every single year between 2019 and 2023. For instance, in 2019, Bexton's rate was 6.5% compared to Arland's 4.2%. By 2023, Bexton's rate was 5.1% compared to Arland's 3.9%.
- **Comparison 2**: Both countries experienced a peak in unemployment in the year 2020. Arland's unemployment rate reached a peak of 5.8% in 2020, while Bexton's peaked at 8.1% in the same year.
- **Comparison 3**: Over the entire period (2019 to 2023), Bexton achieved a larger overall reduction in its unemployment rate than Arland. Bexton's rate fell by 1.4 percentage points (from 6.5% to 5.1%), whereas Arland's rate fell by 0.3 percentage points (from 4.2% to 3.9%).

For identifying one significant point of comparison with supporting data from the extract: 2 marks.
For identifying a second significant point of comparison with supporting data from the extract: 2 marks.

Maximum of 2 marks if no supporting data is used or if the student only makes one comparison with data.

Points of comparison must clearly contrast the two countries over time or compare specific data points. Simple reading of data for one country alone does not constitute a comparison.

Diagram Description: 1. Axes: The vertical axis must be labelled 'Price' (or P) and the horizontal axis 'Quantity' (or Q). 2. Initial Equilibrium: A downward-sloping demand curve (D) and an upward-sloping supply curve (S1) intersecting to show the initial equilibrium price (P1) and quantity (Q1). 3. Shift: A parallel or non-parallel shift of the supply curve to the right (or downwards) to S2, representing the impact of the subsidy reducing production costs. 4. New Equilibrium: The new intersection of D and S2 showing a lower equilibrium price (P2) and a higher equilibrium quantity (Q2).

Marks are awarded as follows: 1 mark for correctly labelled axes (Price and Quantity) and initial curves (D and S1). 1 mark for showing the initial equilibrium price (P1) and quantity (Q1) at the intersection of D and S1. 1 mark for showing a rightward/downward shift of the supply curve to S2. 1 mark for showing the new, lower equilibrium price (P2) and higher equilibrium quantity (Q2) at the intersection of D and S2.

### Diagram Description
To support this answer, draw a positive externalities in consumption/benefit diagram:
* **Axes**: The vertical axis is labeled 'Costs, Benefits, and Price (\(P\))' and the horizontal axis is labeled 'Quantity of Training (\(Q\))'.
* **Curves**:
* Draw a downward-sloping Marginal Private Benefit (\(MPB\)) curve.
* Draw a downward-sloping Marginal Social Benefit (\(MSB\)) curve that lies to the right of (above) the \(MPB\) curve, reflecting the positive external benefits of training.
* Draw an upward-sloping Marginal Private Cost curve equal to Marginal Social Cost (\(MPC = MSC\)).
* **Equilibriums**:
* The free-market equilibrium is determined where private benefits equal private costs (\(MPB = MPC\)), yielding quantity \(Q_1\) and price \(P_1\).
* The socially optimum equilibrium is determined where social benefits equal social costs (\(MSB = MSC\)), yielding quantity \(Q_2\) and price \(P_2\).
* Since \(Q_1 < Q_2\), there is underprovision of training, represented by a shaded triangular area of **deadweight welfare loss** pointing rightwards from \(Q_1\) to \(Q_2\), bounded by the \(MSB\) and \(MSC\) curves.
* **The Subsidy Effect**:
* A subsidy of value \(s\) per unit shifts the \(MPC\) curve downwards/rightwards to \(MPC_{\text{subsidy}}\) (or shifts supply rightwards).
* The new market equilibrium occurs where \(MPC_{\text{subsidy}} = MPB\), which aligns perfectly with the socially optimal output level \(Q_2\).

### Written Explanation
1. **Nature of the Market Failure**:
* Employee training generates significant positive externalities (external benefits to third parties). When a firm trains a worker, the worker gains valuable skills. If the worker eventually leaves the firm, other employers in the industry benefit from a highly skilled worker without having paid for their training (the free-rider problem).
* Because private firms only consider their own private costs (\(MPC\)) and private benefits (\(MPB\)), they ignore these wider external benefits. Consequently, in a free market, training is underprovided at \(Q_1\) rather than the socially optimal level of \(Q_2\), leading to market failure and a misallocation of resources (deadweight welfare loss).

2. **How the Subsidy Corrects the Market Failure**:
* A government subsidy is a financial grant paid to firms to reduce their costs of production. In this case, it lowers the private cost of delivering training schemes.
* This shifts the firm's private cost curve downwards from \(MPC\) to \(MPC_{\text{subsidy}}\).
* Because training is now cheaper to provide, firms are incentivised to expand their training programmes.
* The market output expands from the underprovided level \(Q_1\) to the socially optimal level \(Q_2\), where the full social benefit of training is realized (\(MSB = MSC\)).
* This internalises the externality, solves the skills shortage, and completely eliminates the deadweight welfare loss, achieving allocative efficiency.

### Marking Scheme (AQA 10-Mark Level Descriptors)

* **Level 3 (7-10 marks)**:
* **Analysis**: Good, logical, and focused economic analysis of how a subsidy corrects the market failure associated with positive externalities. The chain of reasoning is clear and complete, linking the reduction in costs to the expansion of output to the socially optimal level.
* **Diagram**: An accurate, fully labeled externalities diagram is integrated into the explanation, showing \(MPB\), \(MSB\), \(MPC\), the market equilibrium, the social optimum, the welfare loss, and the shifting effect of the subsidy.

* **Level 2 (4-6 marks)**:
* **Analysis**: Reasonable analysis of positive externalities and/or subsidies, but with some gaps in the logical chain (e.g., failing to explain why training has external benefits or how the subsidy shifts the curve to reach \(Q_2\)).
* **Diagram**: A diagram is present but may have minor labeling errors (e.g., confusing \(MSB\) and \(MSC\)), or the diagram is correct but not fully integrated into the written text.

* **Level 1 (1-3 marks)**:
* **Analysis**: Basic, descriptive answers showing limited understanding of market failure, externalities, or subsidies.
* **Diagram**: No diagram, or the diagram is incorrect and unhelpful.

### Mark Breakdown Guideline:
* **Diagram (up to 3 marks)**:
* **1 mark** for correct labeling of axes, \(MPB\), \(MSB\), and \(MPC=MSC\) curves, demonstrating the initial underproduction (\(Q_1\) vs \(Q_2\)).
* **1 mark** for correctly identifying the deadweight welfare loss area.
* **1 mark** for showing the downward shift of the \(MPC\) curve (or supply curve) to illustrate the mechanism of the subsidy reaching \(Q_2\).

* **Written Explanation (up to 7 marks)**:
* **Max 3 marks** for defining and explaining the market failure: why private firms underprovide training due to external benefits/the free-rider problem, and the divergence between private and social benefits.
* **Max 4 marks** for explaining the transmission mechanism of the subsidy: how it lowers \(MPC\), shifts supply/cost curves, lowers the price/cost of training for firms, increases quantity to \(Q_2\), and eliminates the welfare loss.

### Key Areas of Response:

* **Definitions & Context:**
* **Market Failure:** Occurs when the free market mechanism allocates resources inefficiently. Here, heating with fossil fuels (gas boilers) creates negative externalities in consumption (carbon emissions leading to climate change), meaning the marginal social cost (MSC) exceeds the marginal private cost (MPC).
* **Positive Externalities:** Adopting heat pumps has positive consumption externalities, where marginal social benefit (MSB) exceeds marginal private benefit (MPB).
* **Subsidy:** A payment by the government to suppliers or consumers to reduce the price of a good and encourage its production or consumption.

* **Economic Analysis of a Subsidy:**
* **Diagrammatic Analysis:** A subsidy shifts the supply curve of heat pumps downwards/to the right (from \(S_1\) to \(S_2\)). This lowers the price paid by consumers from \(P_1\) to \(P_{\text{sub}}\), and increases the equilibrium quantity from \(Q_1\) to \(Q_2\). This closes the under-consumption gap, moving the market closer to the socially optimal level where \(MSB = MSC\).
* **Affordability:** Heat pumps have high upfront capital costs (often over £10,000). A subsidy directly reduces this barrier, making clean energy accessible to lower-income households.

* **Limitations of Subsidies (Government Failure):**
* **Opportunity Cost:** Subsidies require significant government funding, which could have been spent on health, education, or insulation programs.
* **Inelastic Supply:** If there is a shortage of trained technicians to install heat pumps, the supply of installations is highly inelastic. A subsidy may simply drive up prices rather than substantially increasing quantity.
* **Inequity / Free-Rider Effect:** High-income households who would have bought heat pumps anyway may benefit from the subsidy (deadweight loss).

* **Alternative Policies:**
* **Taxation on Carbon/Gas:** Increasing taxes on gas bills internalises the negative externality of gas boilers, making heat pumps relatively cheaper without direct government spend. However, this is highly regressive and can exacerbate fuel poverty.
* **Regulation (Bans):** Setting a hard deadline to ban new gas boiler installations provides certainty and forces market transition. However, it can cause public backlash if affordable alternatives are not available.
* **Information Campaigns:** Correcting information failure about the long-term efficiency savings of heat pumps.

* **Evaluation & Conclusion:**
* While a subsidy is highly effective in kick-starting a nascent market and lowering barriers to entry, it is unlikely to be sufficient on its own due to supply-side bottlenecks and budget constraints.
* The "most effective" approach is a policy mix: using subsidies to lower the upfront cost for low-income households, investment in training schemes to increase the price elasticity of supply, and gradual regulatory phase-outs of fossil-fuel boilers to guarantee long-term transition.

### AQA Level Descriptors (25 Marks)

* **Level 5 (21–25 marks):**
* **Characteristics:** Strong, focused economic knowledge and understanding. Precise, logical chains of analytical reasoning. Robust, well-supported evaluation throughout and a clear, reasoned concluding judgment that directly addresses "most effective". Appropriate diagrams integrated flawlessly.

* **Level 4 (16–20 marks):**
* **Characteristics:** Good economic knowledge and understanding. Structured analytical chains of reasoning, though some minor gaps may exist. Clear, balanced evaluation of both the subsidy and at least one alternative policy, leading to a logical conclusion.

* **Level 3 (11–15 marks):**
* **Characteristics:** Reasonable knowledge and understanding of subsidies and market failure. Some structured analysis, but chains of reasoning may be incomplete. Basic evaluation is present but may lack depth or be added only at the end.

* **Level 2 (6–10 marks):**
* **Characteristics:** Limited knowledge and understanding. Economic concepts are applied with errors. Basic analysis with weak logical links. Evaluation is superficial or absent.

* **Level 1 (1–5 marks):**
* **Characteristics:** Very weak response. Lacks structure, contains major economic errors, and shows little to no understanding of the question topic.