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Mock 19 HL Paper 3 Mark Scheme
Mock 19 HL Paper 3 Mark Scheme
1. The diagram below illustrates the production function for a hamburger restaurant
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where the output is the number of hamburger meals produced per hour and the
labour is the number of employees per hour.
(a) (i) State at what level of output diminishing marginal returns sets in and
explain your reasoning.
[2]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
2 Accurate definition. 2
The idea that the increase in output created by an additional employee is less than
than previously and that this occurs when the fourth person is employed.
(ii) Explain at what level of output is the marginal product (of labour) zero?
[2]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
2 Accurate definition. 2
The idea that the increase in output created by an additional employee is constant
and that this occurs when the eighth person is employed.
The hamburger restaurant has (fixed) capital cost of €10/hour and labour cost of €6/hour
per employee, while the cost of land is €1,50/meal.
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(b) (i) Using the diagram on the previous page, calculate the total and average cost
when output is 18 and 22 hamburgers per hour.
[3]
(ii) Using your answer from (b) (i), calculate the marginal cost of increasing output
from 18 to 22 hamburgers per hour.
[2]
(c) The average and marginal cost curves for the hamburger restaurant is shown on the
diagram below
M
C
A
C
A
R
M
R
(d) (i) Construct and label the AR function on the diagram on the above diagram.
[2]
(ii) The hamburger restaurant is in a market with many competing firms, what
market structure is it operating under; give reason for your answer.
[2]
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Level Marks
0 The work does not reach a standard described by the descriptors below. 0
The idea that the it is a monopolistic competition or that many firms are competing
and the AR or demand function has a negative slope.
2 Accurate definition. 2
The idea that the it is a monopolistic competition and that many firms are competing
and the AR or demand function has a negative slope.
(iii) State the MR function in the box below, giving reason for the function, and
construct and label the MR function on the diagram on the previous page.
[3]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
3 That MR is twice the slope of AR, drawn on the diagram and MR = 7 - 0.4q 3
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
The idea that allocative efficiency maximises consumer and producer surplus
where AR = MC or that productive efficiency is when resources used are minimised
where MC = AC (or AC is minimised).
2 Accurate definition. 2
The idea that allocative efficiency maximises consumer and producer surplus
where AR = MC and that productive efficiency is when resources used are minimised
where MC = AC (or AC is minimised).
(ii) With reference to the diagram you constructed on page 3, state the level of
output for allocative and productive efficiency.
[2]
(iii) The hamburger restaurant is maximising revenues. At what level of output and
price will it sell and will it make a profit while doing so?
[3]
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Level Marks
0 The work does not reach a standard described by the descriptors below. 0
Turn over
2018 2019
A 17.25 18.75 23
B 21.00 19.50 13
C 8.25 9.75 37
D 25.50 25.25 9
E 18.50 19.25 18
Assume that 2018 is the base year for the purpose of calculating the CPI.
(a) (i) Calculate the consumer price index (CPI) for Alba in 2019. [3]
(17.75 x 23) + (21 x 13) + (8.25 x 37) + (25.5 x 9) + (18.5 x 18) => 408.25 + 273 + 305.25
+ 229.5 + 333 => 1549
(18.75 x 23) + (19.5 x 13) + (9.75 x 37) + (25.25 x 9) + (19.25 x 18) => 431.25 + 253.5 +
360.75 + 227.25 + 346.5 => 1619.25
CPI = (1619.25/1549) x 100 or ((1619.25-1549)/1549) + 100 => 104.5
(ii) State two reasons why the typical basket of goods bought by citizens of Alba
may change over time.
[2]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
The idea that consumption habits change over time; spend less on books and
paper and more on electronics and internet access or quality changes; mobile
are more efficient year after year.
The idea that consumption habits change over time; spend less on books and
paper and more on electronics and internet access and quality changes; mobile
are more efficient year after year.
Alba has nominal GDP in billions of € given by the table below:
2018 237
2019 241
(b) (i) Using your answer from (a) (i), calculate the real GDP of Alba in 2018 and 2019
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[2]
(ii) Using your answer from (b) (i), calculate the economic growth of Alba 2018-19. [2]
Alba has a population (in thousands) structure given in the table below:
Population
Under 16 918
16-64 3456
Over 64 1026
(c) (i) Calculate the real GDP/capita for Alba in 2019 [3]
(ii) The Total Labour Force is 77% of the working age population of Alba. Using the
table on the previous page calculate the size of the Total Labour Force.
[3]
(iii) The unemployment rate is 4.2%, calculate the number of unemployed in Alba. [2]
ASL
ADL TLF
w1
q1 q2 q3 Quantity of
labour
Or an AD/AS diagram showing a deflationary/recessionary gap (Keynesian or New
Classical) with an explanation that the GDP below full employment is the result of
demand-deficient unemployment
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
1 A vague explanation. 1
The idea that it is unemployment not accounted for in the statistical calculation.
2 A precise explanation. 2
The idea that it is unemployed individuals who have given up searching for
employment and so are not counted as unemployed in the statistics; are now
outside the total labour force.
(ii) Explain what effect hidden unemployment may have the statistical level of
unemployment. [2]
That it reduces the official data often making unemployment less than it actually is.
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3. The exchange rate of Cymru is £1= €1.25 and due to inflation the Cymru pound has
depreciated by 12%. In Cymru, the PED for imports is 0.9 and the PED for exports is 2.4
(a) (i) Calculate the new exchange rate resulting from the depreciation. [2]
1.25 x 0.12 = 0.15 => 1.25 - 0.15 = 1.1 New Exchange Rate i £1 = €1.1
(ii) Explain how the depreciation has an effect on imports to and exports from
Cymru
[3]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
1 Some vague explanation that it has a positive effect on exports and negative
effect on imports. 1
(b) (i) State the Marshall-Lerner Condition and explain whether Cymru fulfills this
condition [3]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
1 Some vague explanation that it depreciation has a positive effect the current
account due to changes in the level of exports and imports. 1
2 That the combines elasticities of exports and imports are greater than one or
that a depreciation or devaluation of the currency will improve the current
account. 2
3 That the combines elasticities of exports and imports are greater than one and
that a depreciation or devaluation of the currency will improve the current
account. 3
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(ii) Sketch a diagram in the space below illustrating the effect of the depreciation on
the current account of Cymru over time [4]
Current
Account Current account
surplu
s
0 Time
t1 t2
deficit
2019 100 94
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
1 A vague explanation. 1
2 A precise explanation. 2
The idea that it measures how much has to be exported to buy imports or the
formula: (index of average export prices/index of average import prices) x 100.
(ii) Calculate the terms of trade for Cymru in 2018 and 2019. [4]
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(d) Explain the relationship between the depreciation of the Cymru pound (£), change in
the current account and change in the terms of trade.
[4]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
(e) Give two reasons why a government may want to avoid currency depreciation.
[3]
Level Marks
0 The work does not reach a standard described by the descriptors below. 0
1 Some vague explanation that it depreciation has a positive effect the current
account due to changes in the level of exports and imports. 1
2 That import prices and inflation may increase or that the increased inflation
may unemployment or a fall in GDP 2
3 That import prices and inflation may increase and that the increased inflation
may unemployment or a fall in GDP or any other plausible reason (e.g. negative
effect on investment) 3