6eC03 - EXAM TIPS SESSION

Data Questions

Application

Big exam tip – engage in context, use your common sense then apply theory.

Make sure you use the data, usually two marks reserved for in Analysis and sometimes in evaluation e.g June 2010 Q9d insert RWE and EON in your Game Theory diagram - then discuss in context of electricity industry. Ensure you fully discuss in the context of the data  - see June 2011 Q10c if you click here, the second script
on page 44 -45   http://qualifications.pearson.com/content/dam/pdf/A%20Level/Economics/2013/Exam%20materials/6EC03_01_pef_20110817.pdf

Price Discrimination
Worth a read (June 2011 10b one reason Thornton charges different prices in shop compared to website Q). Key point is to discuss demand curves as more or less price elastic!
Question 10 (b) A number of candidates were able to examine and evaluate a factor fully. Cost was the most popular factor to examine and evaluate. Contrastingly, others looked at the possibility of price discrimination usually choosing to illustrate the arguments with diagrams – although not a few attempts at such diagrams were flawed (typically with regard to output levels and/or profit areas).      There was a sloppy tendency (for which no penalty as such in the mark scheme) when writing about price discrimination to use the terms ‘price-elastic’ and ‘price inelastic’ instead of ‘more price-elastic’ and ‘less price-elastic’: MC would have to be negative for a profit-maximiser to price a product at a price-inelastic point on the demand curve. Also - it is a big diagram (worth time for marks - perhaps just explain CAREFULLY) - so use extra paper at end of script and asterix indicated page carried onto.

Efficiency - June 2011 Q10d - 16 marks
Good revision way in - list different types of economies of scale and efficiencies. Use diseconomies of scale as only one evaluative point.  "It was good to see the odd candidate showing an understanding that economies and diseconomies of scale (caused as they are by two quite different sets of factors) can both occur simultaneously and that the issue is which at any level of expansion is the greater." Good response on p49-50 - How do you link productive and allocative efficiency to two companies merging?

Dominance
Why large firms dominate – has to be about LRAC – economies of scale – commercial, technical, financial; but also consider collusion to keep small firms out (barriers to entry/exit), monopsony abuse - prevents small firms getting good deals from suppliers, monopoly abuse - preventing small firms supplying to outlets. 

       Monopolistic competition 

       Could either argue this is a local monopoly or short term monopoly with abnormal profit but long run monopolistic competition normal profit.

Predatory Pricing

Predatory explain more carefully the process of killing off rivals not just grabbing market share, how do they retain. Evaluating predatory – risking being repetitive if already said illegal behaviour elsewhere – consider that it can only be run as a short term tactic as run at a loss and have to cross subisidise (can they do this?) plus it is effective given brand loyalty.