2025 Edexcel IAL Economics (YEC11) 模擬試題連答案詳解

In the long run, freedom of entry and exit in monopolistic competition ensures that firms can only make normal profits. The firm's demand (AR) curve becomes tangent to its average total cost (ATC) curve. Therefore, price equals ATC, and abnormal profit is zero. The firm operates with excess capacity, so it does not produce at the minimum of ATC, and price remains greater than marginal cost (allocative inefficiency).

1 mark for the correct option (C). No marks for incorrect options.

First, calculate Real GDP for both years. Real GDP in Year 1 = Nominal GDP in Year 1 / (GDP Deflator / 100) = $400 billion / (100 / 100) = $400 billion. Real GDP in Year 2 = Nominal GDP in Year 2 / (GDP Deflator / 100) = $462 billion / (105 / 100) = $440 billion. Next, calculate the percentage change: (($440 billion - $400 billion) / $400 billion) * 100 = 10.0%.

1 mark for the correct calculation and selecting option (B). 0 marks for any other option.

The Human Development Index (HDI) measures development based on three dimensions: life expectancy at birth (representing a long and healthy life), mean and expected years of schooling (representing knowledge), and GNI per capita at PPP (representing a decent standard of living).

1 mark for selecting option (A) which correctly identifies the three dimensions. 0 marks for other options.

A maximum price set below the market equilibrium price results in an excess demand (shortage) for rented accommodation because quantity demanded increases while quantity supplied contracts. This shortage often leads to non-price rationing mechanisms, such as waiting lists, and the emergence of informal or shadow markets where landlords or sub-letters charge tenants above the legal maximum price.

1 mark for the correct microeconomic effect (C). 0 marks for incorrect options.

First, calculate the current Average Total Cost (ATC) = AVC + AFC = $15 + $5 = $20. Next, compare the Marginal Cost (MC) of the next unit, which is $18, with the current ATC and AVC. Since MC ($18) is less than the current ATC ($20), producing this unit will drag the average total cost down, causing ATC to decrease. However, since MC ($18) is greater than the current AVC ($15), producing this unit will drag the average variable cost up, causing AVC to increase.

1 mark for the correct relationship analysis and selecting option (D).

To find comparative advantage, calculate the opportunity cost of each good for both countries. For Country X: the opportunity cost of 1 tonne of wheat is 50/100 = 0.5 metres of cloth; the opportunity cost of 1 metre of cloth is 100/50 = 2 tonnes of wheat. For Country Y: the opportunity cost of 1 tonne of wheat is 80/120 = 0.67 metres of cloth; the opportunity cost of 1 metre of cloth is 120/80 = 1.5 tonnes of wheat. Country X has a lower opportunity cost in producing wheat (0.5 < 0.67), so it has a comparative advantage in wheat. Country Y has a lower opportunity cost in producing cloth (1.5 < 2), so it has a comparative advantage in cloth.

1 mark for the correct calculation and identification of comparative advantages (B).

Percentage change in price:
\(\Delta P = 8.80 - 8.00 = 0.80\)
\(\% \Delta P = (0.80 / 8.00) \times 100 = 10\%\)

Percentage change in quantity demanded:
\(\Delta Qd = 21,500 - 25,000 = -3,500\)
\(\% \Delta Qd = (-3,500 / 25,000) \times 100 = -14\%\)

Price elasticity of demand (PED):
\(PED = \frac{\% \Delta Qd}{\% \Delta P} = \frac{-14\%}{10\%} = -1.4\)

- 1 mark for calculating the percentage change in price: \(10\%\).
- 1 mark for calculating the percentage change in quantity demanded: \(-14\%\) (or \(14\%\)).
- 1 mark for the correct formula: \(PED = \frac{\% \Delta Qd}{\% \Delta P}\).
- 1 mark for the correct final answer: \(-1.4\) (accept \(1.4\)).

The formula for the multiplier (\(k\)) in an open economy with a government sector is:
\(k = \frac{1}{MPW}\)
where \(MPW\) is the marginal propensity to withdraw (leak).
\(MPW = MPS + MPT + MPM\)
\(MPW = 0.15 + 0.20 + 0.15 = 0.50\)

Therefore:
\(k = \frac{1}{0.50} = 2\)

- 1 mark for identifying the correct formula for the multiplier: \(k = \frac{1}{MPW}\) or \(k = \frac{1}{MPS + MPT + MPM}\).
- 1 mark for calculating total marginal propensity to withdraw (MPW): \(0.50\).
- 2 marks for the correct final answer of \(2\). (If calculation is incorrect but the method is shown, 1 mark can be awarded for substituting the values correctly).

A diagram showing:
1. An initial equilibrium where demand (\(D\)) is steeper than supply (\(S\)) to represent price inelastic demand.
2. A leftward/upward shift of the supply curve from \(S\) to \(S + \text{tax}\).
3. The new equilibrium price \(P_2\) and quantity \(Q_2\).
4. Shaded or clearly labeled areas representing consumer burden (from \(P_1\) to \(P_2\) over the new quantity \(Q_2\)) and producer burden (from \(P_1\) down to the net price received by producers over the new quantity \(Q_2\)).

Explanation:
Since demand is relatively price inelastic, consumers are less responsive to price changes. Thus, the majority of the tax burden is passed on to the consumer in the form of a higher price, making the consumer burden larger than the producer burden.

- 1 mark for drawing a demand curve that is relatively steeper than the supply curve, with initial equilibrium labels.
- 1 mark for shifting the supply curve vertically upwards by the amount of the tax to \(S_1\) or \(S + \text{tax}\).
- 1 mark for showing the correct change in equilibrium price (rising) and quantity (falling).
- 1 mark for identifying that the consumer burden of the tax is greater than the producer burden.

To find the equilibrium price (\(P\)), set quantity demanded (\(Qd\)) equal to quantity supplied (\(Qs\)):
\(500 - 4P = -100 + 6P\)
Add \(4P\) to both sides:
\(500 = -100 + 10P\)
Add \(100\) to both sides:
\(600 = 10P\)
Divide by 10:
\(P = 60\)

To find the equilibrium quantity (\(Q\)), substitute \(P = 60\) back into either the demand or supply equation:
Using demand:
\(Q = 500 - 4(60) = 500 - 240 = 260\)
Using supply:
\(Q = -100 + 6(60) = -100 + 360 = 260\)

Equilibrium price is \(\$60\).
Equilibrium quantity is \(260\text{ kg}\).

- 1 mark for setting \(Qd = Qs\) (\(500 - 4P = -100 + 6P\)).
- 1 mark for correct algebraic manipulation to solve for price (e.g. \(10P = 600\)).
- 1 mark for the correct price: \(\$60\).
- 1 mark for the correct quantity: \(260\text{ kg}\).

A diagram showing:
1. Vertical axis labeled 'Price Level' (PL) and horizontal axis labeled 'Real Output' (Y).
2. A downward-sloping Aggregate Demand (AD) curve.
3. A vertical Long-Run Aggregate Supply (LRAS) curve shifting to the right from \(LRAS_1\) to \(LRAS_2\).
4. The initial equilibrium at \(PL_1\) and \(Y_1\), and the new equilibrium at \(PL_2\) and \(Y_2\).

Explanation:
An increase in national productivity increases the productive capacity of the economy, which shifts the vertical LRAS curve to the right. This leads to a higher potential level of real output (\(Y_2\)) and puts downward pressure on the price level (\(PL_2\)).

- 1 mark for drawing and correctly labeling the axes (Price Level and Real GDP/Output) and the AD curve.
- 1 mark for drawing the vertical LRAS curve shifting to the right.
- 1 mark for showing the correct initial equilibrium (\(PL_1\), \(Y_1\)) and new equilibrium (\(PL_2\), \(Y_2\)) at the intersection of AD and the LRAS curves.
- 1 mark for explaining that higher productivity increases productive capacity, shifting LRAS rightward, lowering the price level, and increasing real output.

To calculate the total variable cost (TVC) at 400 units of output, we can use two alternative methods:

**Method 1: Using Average Variable Cost (AVC)**
1. Calculate the Average Variable Cost (AVC):
\(\text{AVC} = \text{ATC} - \text{AFC}\)
\(\text{AVC} = \$15.00 - \$3.50 = \$11.50\)

2. Calculate the Total Variable Cost (TVC):
\(\text{TVC} = \text{AVC} \times \text{Output (Q)}\)
\(\text{TVC} = \$11.50 \times 400 = \$4,600\)

**Method 2: Using Total Costs (TC) and Total Fixed Costs (TFC)**
1. Calculate the Total Cost (TC):
\(\text{TC} = \text{ATC} \times \text{Q} = \$15.00 \times 400 = \$6,000\)

2. Calculate the Total Fixed Cost (TFC):
\(\text{TFC} = \text{AFC} \times \text{Q} = \$3.50 \times 400 = \$1,400\)

3. Calculate the Total Variable Cost (TVC):
\(\text{TVC} = \text{TC} - \text{TFC}\)
\(\text{TVC} = \$6,000 - \$1,400 = \$4,600\)

* **1 mark** for showing a correct intermediate stage of calculation, e.g. calculating AVC as \(\$11.50\), or calculating TC as \(\$6,000\) and TFC as \(\$1,400\).
* **1 mark** for the correct final answer: \(\$4,600\) (accept 4,600 or 4600).

*Note: Award full 2 marks for the correct answer of \(\$4,600\) even if no workings are shown.*

To calculate the terms of trade (ToT) index, use the formula:

\(\text{Terms of Trade} = \frac{\text{Index of Export Prices}}{\text{Index of Import Prices}} \times 100\)

Identify the indices for Zephyria in the year 2023 from Figure 1:
* Index of Export Prices = 122.5
* Index of Import Prices = 98.0

Substitute these values into the formula:

\(\text{Terms of Trade} = \frac{122.5}{98.0} \times 100\)

Calculate the result:

\(\text{Terms of Trade} = 1.25 \times 100 = 125\)

The terms of trade index for Zephyria in 2023 is 125.

* **1 mark** for writing down the correct formula: \(\frac{\text{Index of Export Prices}}{\text{Index of Import Prices}} \times 100\) (or equivalent).
* **1 mark** for correct substitution: \(\frac{122.5}{98.0} \times 100\).
* **1 mark** for intermediate calculation of 1.25.
* **1 mark** for the correct final answer of **125** (or **125.0**).

*Note: Award full 4 marks for the correct final answer of 125 even if no working is shown.*

Reason 1: To avoid mutually destructive price wars.
- Knowledge: Firms in an oligopoly are highly interdependent. If one firm cuts prices, rivals are highly likely to retaliate by cutting their prices to protect their market share. This leads to a price war where all firms lose revenue, especially when market demand is price inelastic.
- Application: Extract A notes that TeleConnect operates in a highly concentrated market (3 firms sharing over 85% market share) where a price war would lead to a 'significant drop in revenues' as demand is 'relatively price inelastic'.
- Analysis: Because of interdependence, a price cut does not gain a long-term competitive advantage. Instead, maintaining prices and competing on non-price factors preserves industry profit margins.

Reason 2: To build brand loyalty and reduce consumer price sensitivity.
- Knowledge: Non-price competition (such as loyalty schemes, quality improvements, or perks) differentiates the product, making consumers less sensitive to price differences and increasing barriers to entry.
- Application: TeleConnect has 'upgraded its customer service app', offered 'free subscription streaming services', and expanded its '5G network coverage' to make customers 'less likely to switch to rivals'.
- Analysis: This successful differentiation shifts the firm's demand curve to the right and makes it more price inelastic, allowing the firm to secure long-term supernormal profits without risking price-cutting retaliation.

For each of the two reasons (up to 3 marks each):
- 1 mark for identifying a valid reason why firms choose non-price competition (Knowledge).
- 1 mark for applying the reason to the context of TeleConnect / Extract A (Application).
- 1 mark for explaining the economic mechanism or outcome of this choice (Analysis).

Maximum: 6 marks.

Knowledge, Application, and Analysis (5 marks):
- Definition of contestability: A market structure characterised by low barriers to entry and exit, and near-zero sunk costs.
- Application: In Extract A, contestability has increased due to 'third-party logistics software' and 'freelance courier networks' which reduce the sunk costs of entering the quick-commerce market.
- Impact on Pricing: Incumbents can no longer charge high premium delivery fees and maximize short-run profits where MC = MR. Under the threat of 'hit-and-run' entry, they must lower prices. This is shown by SwiftDeliver and RapidCart slashing delivery fees by up to 40%, moving closer to limit pricing (where P = AC, earning normal profits).
- Impact on Output: Incumbents must increase output and diversify to protect their 85% market share. This is evidenced by expanding their product ranges to include hot food and pharmaceutical items, aiming to capture more transaction volume.
- Diagram: A diagram illustrating a monopolist moving from profit-maximising price and output (Pm, Qm) to a highly contestable outcome (Pc, Qc) with lower prices and higher output.

Evaluation (3 marks):
- Limit pricing vs Predatory pricing: The 40% price cut might not be a permanent limit-pricing strategy; if it is predatory pricing designed to drive the localized start-ups out of business, prices may rise back to premium levels once competition is eliminated.
- Non-price competition: Incumbents are 'investing heavily in brand loyalty programmes'. If successful, this creates an artificial barrier to entry (asymmetric brand equity), rendering the market less contestable in the long run and allowing them to maintain higher prices.
- Reality of sunk costs: While software is cheap, marketing, advertising, and user-acquisition costs in quick-commerce remain high and represent significant sunk costs, meaning the market may not be as highly contestable as it appears.

KAA (5 marks):
- Level 3 (4-5 marks): Demonstrates precise economic understanding of contestability, limit pricing, and output changes. Strong application to Extract A and logical chain of analytical reasoning.
- Level 2 (2-3 marks): Some understanding of contestability and its impact on pricing/output. Some application to the text, but lacks depth or diagrammatic accuracy.
- Level 1 (1 mark): General or vague definitions with minimal economic analysis.

Evaluation (3 marks):
- Level 2 (2-3 marks): Evaluates the argument effectively, considering factors such as predatory vs. limit pricing, the role of brand loyalty as an entry barrier, or short-run vs. long-run outcomes.
- Level 1 (1 mark): Identifies a basic evaluative point but does not develop it.

### Analytical Points (KAA - 8 Marks):

* **Definition of Concepts:** Horizontal mergers occur when two firms at the same stage of production in the same industry combine. Market concentration measures the market share of the largest firms (e.g., using the \(n\)-firm concentration ratio).
* **Arguments for Negative Microeconomic Effects:**
* **Monopoly Power and Higher Prices:** As concentration increases, the market moves towards an oligopoly or monopoly. Firms gain greater price-setting power, allowing them to raise subscription fees from \(P_1\) to \(P_2\), leading to a loss of consumer surplus and welfare loss (allocative inefficiency where \(P > MC\)).
* **Reduced Consumer Choice and Homogenisation:** Consolidation may lead to the cancellation of niche content or less diverse programming as the merged entity rationalises its portfolio to maximise profits.
* **Monopsony Power:** Larger platforms can exploit monopsony power over independent content creators, actors, and writers, driving down their earnings.
* **X-Inefficiency:** With reduced competitive pressure, the merged firm may lack the incentive to control operational costs, leading to waste and organizational slack.

* **Arguments for Positive Microeconomic Effects:**
* **Economies of Scale:** Merging allows firms to spread massive fixed costs (such as technology infrastructure and global marketing) over a larger subscriber base. This lowers average costs (from \(ATC_1\) to \(ATC_2\)), which could theoretically be passed on to consumers in the form of lower prices or better platform features.
* **Dynamic Efficiency:** Supernormal profits generated from increased market power can be reinvested into research and development (e.g., better recommendation algorithms) and high-budget original content production, improving consumer utility.
* **Survival in a Global Market:** In highly capital-intensive industries, mergers may be the only way for domestic firms to survive against global giants.

### Evaluative Points (Evaluation - 6 Marks):

* **Contestability of the Market:** Even if concentration is high, the threat of potential entry (contestability) may prevent the merged firm from exploiting its market power. If entry barriers are lowered by rapid technological changes (e.g., new open-source distribution platforms), the firm must remain efficient.
* **Regulatory Intervention:** Competition authorities (such as the CMA or FTC) may impose conditions on the merger (e.g., price caps or divestment of certain assets) to protect consumers.
* **Objective of the Firm:** The impact depends on whether the merged firm aims for profit maximisation or growth. If they pursue sales or revenue maximisation to build market share, prices may remain low.
* **Short-run vs. Long-run:** In the short run, consumer choice might decrease as integration occurs. In the long run, dynamic efficiency gains might yield far superior content and technology than would have been possible under a highly fragmented market structure.

### Marking Criteria

#### Knowledge, Application, and Analysis (8 Marks)
* **Level 3 (6-8 Marks):** Fully developed economic analysis of both positive and negative microeconomic effects of increased concentration. Well-supported with microeconomic theory (e.g., monopoly diagrams, economies of scale, efficiency concepts) and explicit, consistent reference to the digital streaming industry.
* **Level 2 (3-5 Marks):** Some economic analysis of the effects of mergers/concentration, but lacks depth or contains logical gaps. Application to the streaming industry is present but superficial.
* **Level 1 (1-2 Marks):** Basic identification of merger effects or definition of key terms with little to no analytical development.

#### Evaluation (6 Marks)
* **Level 2 (4-6 Marks):** Balanced, high-quality evaluative points that weigh different outcomes (e.g., contestability, regulatory role, short-run vs. long-run). Leads to a reasoned conclusion.
* **Level 1 (1-3 Marks):** Identifies evaluative points (e.g., 'it depends on regulation') but does not fully explain or develop them.

Introduction: A collusive oligopoly is a market structure dominated by a few large firms that act jointly to restrict output and set high prices to maximize joint profits. A highly contestable market is characterized by low barriers to entry and exit, allowing potential rivals to engage in 'hit-and-run' entry if supernormal profits are made. An example is the European low-cost aviation market post-deregulation. Diagrammatic analysis: The response should include a diagram showing an incumbent firm in a collusive oligopoly producing at the profit-maximizing level where \(MC = MR\), charging a high price \(P_M\) and producing low output \(Q_M\), resulting in significant supernormal profits (area \(P_M - AC \times Q_M\)). In a highly contestable market, the threat of entry forces incumbent firms to lower prices to the limit price level where \(P = AC\) (normal profit) or close to the allocative efficiency point where \(P = MC\), increasing output to \(Q_C\). This eliminates supernormal profits and transfers consumer surplus back to the buyers. Microeconomic impacts: 1. Allocative Efficiency: Price falls towards marginal cost (\(P = MC\)), which reduces deadweight loss and improves allocative efficiency. 2. Productive Efficiency: To survive potential entry, incumbents must minimize their average costs, leading to productive efficiency gains and a reduction in organizational slack (X-inefficiency). 3. Dynamic Efficiency: While lower supernormal profits might limit the internal funds available for long-run research and development, the ongoing threat of entry may incentivize continuous process innovation to keep costs low. Evaluation: 1. Sunk Costs: True contestability depends on the near-absence of sunk costs. In industries like aviation, leasing aircraft reduces sunk costs, but route-licensing and airport slot allocations can still act as significant barriers. 2. Strategic Barriers: Incumbent firms may respond to contestability by engaging in non-price competition (e.g., frequent-flyer programs) or limit pricing to artificially deter entry, preventing the market from achieving perfect contestability. 3. Information Asymmetry: Incumbents often have superior local market knowledge, meaning new entrants face higher risk, which reduces the threat of 'hit-and-run' entry. 4. Regulatory Role: The transition often requires strong regulatory oversight to prevent predatory practices and maintain low entry barriers, meaning contestability is rarely self-sustaining without state intervention.

Knowledge, Application, and Analysis (12 Marks): Level 1 (1-3 marks): Identifies basic concepts of oligopoly and contestability. Diagram is missing or inaccurate. Level 2 (4-6 marks): Conceptual understanding of collusive oligopoly and contestability with some application to an industry. Diagram shows basic monopoly/oligopoly pricing. Level 3 (7-9 marks): Clear analysis of how contestability shifts the equilibrium from profit-maximisation to normal profit/limit pricing. Good application to an industry. Diagram is mostly accurate showing price and output changes. Level 4 (10-12 marks): Precise, comprehensive analysis of efficiency gains (allocative, productive, dynamic) and consumer welfare. Supported by an accurate and fully-labelled diagram showing the transition from oligopoly to contestable pricing. Evaluation (8 Marks): Level 1 (1-2 marks): Offers generic or superficial evaluative comments with little economic backing. Level 2 (3-5 marks): Balanced evaluation discussing some limitations of contestability, such as the persistence of sunk costs or strategic barriers. Level 3 (6-8 marks): Deep, critical evaluation of the real-world limitations of contestability. Explores strategic actions of incumbents, the role of regulation, and provides a well-reasoned final judgment on whether the transition delivers long-term benefits.

Introduction: Market-oriented strategies promote economic growth and development through the price mechanism, reduced state involvement, trade liberalisation, and foreign direct investment (FDI). Interventionist strategies argue that active state involvement, public investment in infrastructure, education, and selective protectionism are essential to overcome market failures. Economic growth is measured by real GDP expansion, whereas development refers to improvements in multi-dimensional indicators like health, education, and human welfare (HDI). Diagrammatic analysis: The response should include an Aggregate Demand / Aggregate Supply (AD/AS) diagram. Successful strategies (whether market-oriented or interventionist) shift the Long-Run Aggregate Supply (LRAS) curve to the right, from \(LRAS_1\) to \(LRAS_2\), increasing the productive capacity of the economy from \(Y_1\) to \(Y_2\). This is accompanied by an outward shift of Aggregate Demand (\(AD_1\) to \(AD_2\)), demonstrating sustainable, non-inflationary real output growth. Arguments for Market-Oriented Strategies: 1. Trade Liberalisation: Eliminating tariffs and quotas exposes domestic firms to international competition, improving productive efficiency. It allows developing countries to export goods in which they have a comparative advantage. 2. FDI and Capital Accumulation: Low tax rates and deregulation attract multinational corporations, which bring capital, modern technology, and skills, shifting the LRAS right. 3. Microfinance and Privatisation: Privatising inefficient state-owned enterprises reduces the fiscal burden on the state and increases productivity. Arguments for Interventionist Strategies: 1. Infrastructure and Public Goods: Developing countries often suffer from severe infrastructure deficits (e.g., poor roads, unreliable power). The private sector will underprovide these due to non-excludability and high capital costs, making state investment vital. 2. Human Capital Investment: Government funding for primary education and basic healthcare improves labor productivity and increases the long-term potential growth rate. 3. Infant Industry Protection: Temporary trade barriers can allow domestic manufacturing industries to achieve economies of scale before facing global competition. Evaluation: 1. Risk of Market Failure vs. Government Failure: Market-oriented policies can lead to severe income inequality, environmental degradation, and primary product dependency. Conversely, interventionist policies often suffer from corruption, high national debt, and inefficient resource allocation. 2. Complementarity: The two approaches are not mutually exclusive. Markets require strong state institutions to protect property rights, enforce contracts, and provide public goods to function effectively. 3. Stage of Development: Extremely low-income countries typically require heavy interventionist strategies to establish basic infrastructure and educational baselines first, whereas emerging, middle-income economies benefit more from transitioning to market-oriented, export-driven strategies. Conclusion: A balanced 'developmental state' model, combining targeted state intervention with market incentives, is generally the most effective path.

Knowledge, Application, and Analysis (12 Marks): Level 1 (1-3 marks): Outlines basic development strategies. Diagram is missing or incorrect. Level 2 (4-6 marks): Conceptual understanding of both market-oriented and interventionist strategies with basic link to growth. Diagram shows a simple shift in AD or AS. Level 3 (7-9 marks): Clear analysis of how both types of strategies expand productive capacity. Accurate AD/AS diagram showing rightward shift of LRAS. Good real-world references to developing economies. Level 4 (10-12 marks): Precise, comprehensive analysis of multiple strategies on both growth (real GDP) and development (HDI). Fully supported by an accurate, well-explained AD/AS diagram showing sustainable non-inflationary growth. Evaluation (8 Marks): Level 1 (1-2 marks): General evaluative comments with little economic substance. Level 2 (3-5 marks): Balanced evaluation discussing the relative merits and drawbacks of each approach, such as market failure vs government failure. Level 3 (6-8 marks): Critical, nuanced evaluation of the strategies. Recognises their complementarity, the role of institutional quality, and offers a strong, well-reasoned conclusion on which strategy is more effective depending on the country's development stage.