Unit h060 1 Microeconomics Sample Assessment Material

Oxford Cambridge and RSA
AS Level in Economics
H060/01 Microeconomics
Sample Question Paper
Date – Morning/Afternoon
Time allowed: 1 hour 30 minutes
You may use:

• a scientific or graphical calculator
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First name
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Last name
Centre Candidate
number number
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INSTRUCTIONS
• Use black ink. You may use an HB pencil for graphs and diagrams.
• Complete the boxes above with your name, centre number and candidate number.
• Read each question carefully before you start to write your answer.
• Sections A and B: Answer all the questions in each of these sections.
• Section C: Answer one question in this section.
• Write your answer to each question in the space provided.
• Additional paper may be used if required but you must clearly show your candidate
number, centre number and question number(s).
• Do not write in the bar codes.
INFORMATION
• The total mark for this paper is 60.
• The marks for each question are shown in brackets [ ].
• Quality of extended responses will be assessed in questions marked with an asterisk (*).
• This document consists of 20 pages.
© OCR 2016 [601/4801/9] H060/01 Turn over

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Section A
Answer all the questions in this section.
1 Which of the following describes a free good?
A A free good is one given away to consumers to promote the sale of other goods
B A free good is one provided free of charge to consumers by the government
C A free good is one that gives zero satisfaction to consumers
D A free good is one that has zero opportunity cost
Your answer
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2 Which of the following is a consequence of using money rather than a barter system?
A It decreases specialisation
B It decreases the ease of borrowing
C It decreases the need for a double coincidence of wants
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D It decreases trade
Your answer
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3 Which of the following, according to traditional economic theory, is it assumed that a firm will seek to
maximise?
A Customer satisfaction
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B Economic welfare
C Productive efficiency
D Profit
Your answer
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4 Which of the following is a feature of a market economy?
A Competition ensures product differentiation

B Consumer preferences determine the allocation of resources
C Producers aim to maximise positive externalities
D Resources are allocated through the planning mechanism
Your answer
[1]
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5 An economy is allocatively efficient when:
A the marginal private benefit of consumption equals the marginal social benefit
B the output produced maximises total consumer welfare
C there is neither unemployment nor underemployment of factors of production
D total consumer surplus is exactly equal to total producer surplus
Your answer
[1]
6 Which of the following is a public good?
A Defence
B Electricity supply
C Health services
D University education
Your answer
[1]
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It has been estimated that the price elasticity of supply (PES) of flood defences is 0.25 in
the short run and 1.25 in the long run. Which of the following combinations of statements is
correct?
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Short run PES of flood defences Long run PES of flood defences
A Elastic Elastic
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B Elastic Inelastic
C Inelastic Elastic
D Inelastic Inelastic
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Your answer
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8 Which of the following statements is a normative statement?
A An increase in the indirect tax on cigarettes will increase the price of cigarettes
B People aged under 21 years old are more likely to smoke than people over 30 years
old
C People should not be allowed to smoke in private cars
D Smoking can damage your health
Your answer
[1]
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9 Which of the following is an external cost of production?
A The cost of a public relations campaign in support of a new ‘eco-friendly’ factory

B The cost of installing environmentally-friendly equipment in a new factory
C The cost of traffic congestion resulting from opening a new factory
D The cost of transporting products from a new factory to international retail outlets
Your answer
[1]
10 The diagram below shows the market for a product. The current demand curve is D and the
current supply curve is S. Consumers are under-estimating the benefits arising from the
consumption of the product.
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Which of the following changes in demand, supply and price would reduce this under-consumption?
Demand Supply Price

A Extension Increase Decrease
B Increase Contraction Increase
C Decrease Contraction Increase
D Contraction Increase Decrease
Your answer
[1]
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11 Which of the following combinations of causes and consequences in the market for good X
is correct?
Cause Consequence
A A government subsidy is given to There is a movement down the supply

firms producing good X curve for good X
B The price of good X The demand curve for good X shifts to

decreases the right
C The price of a substitute for good X The demand curve for good X shifts to
increases the left
D The wages paid to workers producing The supply curve for good X shifts to the
good X fall right
Your answer
[1]
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12 In the diagram below demand increases from D to D1. Which area represents the increase
in producer surplus?
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A XYT
B XZU
C WTUV
D YZUT
[1]
Your answer

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13 A company operates bus and tram services in a city. If the board of directors has decided to
increase the price of bus fares and leave tram fares unchanged, which of the following
diagrams (labelled A, B, C and D) would show the effect on the market for tram travel in the
city?
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A
B
C
D
Your answer
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14 The information below shows the total cost of production for a firm at different levels of
output.
Total output 0 100 200 300 400 500

Total cost of production £17 500 £28 700 £37 500 £45 100 £53 800 £59 200
What is the average variable cost when 400 units are produced?
A £43.75
B £87.00
C £90.75
D £134.50
Your answer
[1]
15 If a government decides to provide health care free at the point of delivery, then:
A
B
C
D
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the demand for health care will be perfectly elastic
health care will become non-rival
some form of rationing will have to be used in the allocation of health care
there will be no opportunity cost involved in the supply of health care
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Your answer
[1]
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Section B
Answer all the questions in this section.
Food for Thought – Changing Patterns of Food Production and Consumption
Like many economically developed countries, Denmark is facing a growing problem with
obesity. A study conducted by the Danish government in 2013 showed that almost half of
the Danish population was overweight, with one in seven classified as obese. In spite of
this, a tax designed to tackle rising obesity levels lasted little over a year.
5 In 2011 the Danish government introduced a tax on all items with a saturated fat content in
excess of 2.3%. This tax was equal to 16 Danish kroner for every kilogram of saturated fat
present in the food item. By November 2012, the government had announced an end to
this policy and abandoned proposals for an additional tax on sugar. The reason given for
this was that a policy designed to improve its citizens’ health had increased food prices and
10 reduced employment in the Danish food industry. The tax was reported to have targeted
the Danes’ perceived love of butter; however, data from Denmark showed that even before
the introduction of the tax, the average Dane was consuming little more than a third of the
butter they had in 1990. Meanwhile in the United States of America demand for butter had
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increased by 65% since 2000.
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It is not only the market for butter that highlights differences between changing patterns of
consumption in different countries. While Americans are now demanding less meat per
person, in Japan red meat has overtaken fish as the major source of protein in the national
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diet.
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Fig.1 shows that sales of organic food fell in the UK between 2008 and 2011. In response,
UK farmers have been using less of their land to supply it (see Fig. 2). On the other hand
demand continued to rise sharply in European markets. Organic food is produced in a way
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that is environmentally friendly, with artificial fertilisers being banned and pesticides being
25 heavily restricted. In general, this method has a lower crop yield and is less productively
efficient than traditional farming.
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Fig. 1 Sales of organic food and average earnings in the UK, 2008 to 2011
Fig. 2 Hectares used for organic farming in the UK, 2006 to 2012
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16 (a) State one factor of production used in the production of organic food.
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(b) Other than changes in the price of butter, explain two possible factors which would
have caused the demand for butter to increase in the USA (line 13).
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(c) (i) State the formula used to calculate income elasticity of demand for a
product.
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(c) (ii) Using Fig. 1, calculate the income elasticity of demand for organic food in the UK.
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Give your answer correct to two decimal places.
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(d) (i) Explain what is meant by the term ‘sustainability’.
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(d) (ii) Explain how the change from traditional to organic farming impacts on
scarcity.
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(e) Explain one reason which could account for the trend between 2006 and 2010
shown in Fig. 2.
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(f)* Evaluate using an appropriate diagram(s), the role of price elasticity of demand in
determining the impact of an indirect tax such as the Danish ‘fat tax’ (lines 5-6).
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Section C
Answer question 17 or question 18
17* It is now compulsory for young people in England to remain in some form of education or
training until they are 18.
Evaluate, using an appropriate diagram(s), the effectiveness of state provision as a method

of correcting education market failure.
[20]
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18* The United States of America is a major producer and consumer of wheat.
Evaluate, using an appropriate diagram(s), the effectiveness of a buffer stock system as a

method for the United States government to use to maintain stability in the market for
wheat.
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Copyright Information:
Fig.2: Data adapted from the Office for National Statistics © Crown Copyright
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Syndicate (UCLES), which is itself a department of the University of Cambridge.
© OCR 2016 H060/01

…day June 20XX – Morning/Afternoon
AS Level in Economics
H060/01 Microeconomics
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SAMPLE MARK SCHEME
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Duration: 2 hours
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MAXIMUM MARK 60
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This document consists of 24 pages
H060/01 Mark scheme June 20XX
MARKING INSTRUCTIONS
PREPARATION FOR MARKING
SCORIS
1. Make sure that you have accessed and completed the relevant training packages for on–screen marking: scoris assessor Online Training;
OCR Essential Guide to Marking.
2. Make sure that you have read and understood the mark scheme and the question paper for this unit. These are posted on the RM Cambridge
Assessment Support Portal http://www.rm.com/support/ca
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3. Log–in to scoris and mark the required number of practice responses (“scripts”) and the required number of standardisation responses.
YOU MUST MARK 10 PRACTICE AND 10 STANDARDISATION RESPONSES BEFORE YOU CAN BE APPROVED TO MARK LIVE
SCRIPTS.
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TRADITIONAL
Before the Standardisation meeting you must mark at least 10 scripts from several centres. For this preliminary marking you should use pencil and
follow the mark scheme. Bring these marked scripts to the meeting.
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MARKING
1. Mark strictly to the mark scheme.

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2. Marks awarded must relate directly to the marking criteria.
3. The schedule of dates is very important. It is essential that you meet the scoris 50% and 100% (traditional 50% Batch 1 and 100% Batch 2)
deadlines. If you experience problems, you must contact your Team Leader (Supervisor) without delay.
4. If you are in any doubt about applying the mark scheme, consult your Team Leader by telephone, email or via the scoris messaging system.
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5. Work crossed out:

a. where a candidate crosses out an answer and provides an alternative response, the crossed out response is not marked and gains no
marks
b. if a candidate crosses out an answer to a whole question and makes no second attempt, and if the inclusion of the answer does not
cause a rubric infringement, the assessor should attempt to mark the crossed out answer and award marks appropriately.
6. Always check the pages (and additional objects if present) at the end of the response in case any answers have been continued there. If the
candidate has continued an answer there then add a tick to confirm that the work has been seen.
7. There is a NR (No Response) option. Award NR (No Response)
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- if there is nothing written at all in the answer space
- OR if there is a comment which does not in any way relate to the question (e.g. ‘can’t do’, ‘don’t know’)
- OR if there is a mark (e.g. a dash, a question mark) which isn’t an attempt at the question.
Note: Award 0 marks – for an attempt that earns no credit (including copying out the question).
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8. The scoris comments box is used by your Team Leader to explain the marking of the practice responses. Please refer to these comments
when checking your practice responses. Do not use the comments box for any other reason.
If you have any questions or comments for your Team Leader, use the phone, the scoris messaging system, or e–mail.
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9. Assistant Examiners will send a brief report on the performance of candidates to their Team Leader (Supervisor) via email by the end of the
marking period. The report should contain notes on particular strengths displayed as well as common errors or weaknesses. Constructive
criticism of the question paper/mark scheme is also appreciated.
10. E
For answers marked by levels of response:
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a. To determine the level – start at the highest level and work down until you reach the level that matches the answer
b. To determine the mark within the level, consider the following:
Descriptor Award mark

On the borderline of this level and the one below At bottom of level
Just enough achievement on balance for this level Above bottom and either below middle or at middle of level (depending on number
of marks available)
Meets the criteria but with some slight inconsistency Above middle and either below top of level or at middle of level (depending on
number of marks available)
Consistently meets the criteria for this level At top of level
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11. Annotations
Annotation Meaning
12. Subject–specific Marking Instructions
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INTRODUCTION
Your first task as an Examiner is to become thoroughly familiar with the material on which the examination depends. This material includes:
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 the specification, especially the assessment objectives
 the question paper and its rubrics
 the mark scheme.
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You should ensure that you have copies of these materials.
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You should ensure also that you are familiar with the administrative procedures related to the marking process. These are set out in the OCR
booklet Instructions for Examiners. If you are examining for the first time, please read carefully Appendix 5 Introduction to Script
Marking: Notes for New Examiners.
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Please ask for help or guidance whenever you need it. Your first point of contact is your Team Leader.
Rubric Infringement
Candidates may infringe the rubric in the following way:
 answering two questions from Section C.
If a candidate has written two answers for Section C, mark both answers and award the highest mark achieved.
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USING THE MARK SCHEME
Please study this Mark Scheme carefully. The Mark Scheme is an integral part of the process that begins with the setting of the question
paper and ends with the awarding of grades. Question papers and Mark Schemes are developed in association with each other so that
issues of differentiation and positive achievement can be addressed from the very start.
This Mark Scheme is a working document; it is not exhaustive; it does not provide ‘correct’ answers. The Mark Scheme can only provide ‘best
guesses’ about how the question will work out, and it is subject to revision after we have looked at a wide range of scripts.
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The Examiners’ Standardisation Meeting will ensure that the Mark Scheme covers the range of candidates’ responses to the questions, and
that all Examiners understand and apply the Mark Scheme in the same way. The Mark Scheme will be discussed and amended at the
meeting, and administrative procedures will be confirmed. Co–ordination scripts will be issued at the meeting to exemplify aspects of
candidates’ responses and achievements; the co–ordination scripts then become part of this Mark Scheme.
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Before the Standardisation Meeting, you should read and mark in pencil a number of scripts, in order to gain an impression of the range of
responses and achievement that may be expected.
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In your marking, you will encounter valid responses which are not covered by the Mark Scheme: these responses must be credited. You will
encounter answers which fall outside the ‘target range’ of Bands for the paper which you are marking. Please mark these answers according
to the marking criteria.
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Please read carefully all the scripts in your allocation and make every effort to look positively for achievement throughout the ability range.
Always be prepared to use the full range of marks.
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INSTRUCTIONS TO EXAMINERS:
A INDIVIDUAL ANSWERS
1 The indicative content indicates the expected parameters for candidates’ answers, but be prepared to recognise and credit unexpected
approaches where they show relevance.
2 Using ‘best–fit’, decide first which set of BAND DESCRIPTORS best describes the overall quality of the answer. Once the band is
located, adjust the mark concentrating on features of the answer which make it stronger or weaker following the guidelines for
refinement.
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 Highest mark: If clear evidence of all the qualities in the band descriptors is shown, the HIGHEST Mark should be awarded.
 Lowest mark: If the answer shows the candidate to be borderline (i.e. they have achieved all the qualities of the bands below and
show limited evidence of meeting the criteria of the band in question) the LOWEST mark should be awarded.
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 Middle mark: This mark should be used for candidates who are secure in the band. They are not ‘borderline’ but they have only
achieved some of the qualities in the band descriptors.
3 Be prepared to use the full range of marks. Do not reserve (e.g.) high Band 6 marks ‘in case’ something turns up of a quality you have
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not yet seen. If an answer gives clear evidence of the qualities described in the band descriptors, reward appropriately.
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B TOTAL MARKS
1 Transfer the mark awarded to the front of the script.
2 The maximum mark for the paper is 60.
3 The quality of the extended response is assessed on this parts of the question paper which are identified with the use of an asterisk (*).
The assessment of this skill is embedded within each of the levels of response and it must be considered when determining the mark to
be awarded within the appropriate level.
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Levels of response – Level descriptors
Knowledge and understanding/ Analysis Evaluation

Application
Strong An explanation of causes and A conclusion is drawn weighing up both
consequences, fully developing the links sides, and reaches a supported
in the chain of argument. judgement.
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Good Precision in the use of the terms in the An explanation of causes and A conclusion is drawn weighing up both
question and applied in a focused way consequences, developing most of the sides, but without reaching a supported
to the context of the question. links in the chain of argument. judgement.
Reasonable
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Awareness of the meaning of the An explanation of causes and Some attempt to come to a conclusion,
terms in the question and applied to consequences, which omit some key which shows some recognition of the
the context of the question. links in the chain of argument. influencing factors.
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Limited Awareness of the meaning of the Simple statement(s) of cause and An unsupported assertion.
terms in the question. consequence.
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Quantitative
Q Key Rationale AO
skills
1 D Rationale AO1
A Subsidised by retailer/producer.
B Subsidised by government.
C Zero marginal utility.
D Correct: Definition.
2 C Rationale AO1
A It will increase specialisation because money is easier to exchange for an economic good.
B It will increase the ease of borrowing because money is easier to exchange for an economic
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good.
C Correct: It will decrease the need for a double coincidence of wants because there is no longer
the need to find two persons whose disposable processions mutually match each other’s wants.
D It will increase trade because money is easier to exchange for an economic good.
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3 D Rationale AO1
A The consideration of stakeholders and their needs is relatively new; it is not traditional economic
theory.
B This is a result of government taxation policies rather than an objective.
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C This isn’t an objective.
D Correct: Firms have a profit motive, they’ll produce where MR=MC.
4 B Rationale
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A Competition ensures that firms strive to minimise their average costs and achieve productive
AO1
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efficiency.
B Correct: Changes in demand patterns by consumers lead to changes in the allocation of
resources.
C Consumers aim to maximise their individual welfare.
D Resources are allocated through the price mechanism.
5 B Rationale AO1
A Incorrect (ignores production).
B Correct: This is a statement which reflects what is meant by allocative efficiency.
C Incorrect refers to technical productive efficiency.
D Incorrect, simply untrue.
9
Quantitative
Q Key Rationale AO
skills
6 A Rationale AO1
A Correct: non excludable and non-rival.
B Excludable and rival.
C Excludable and rival.
D Excludable and rival.
7 C Rationale AO2 
A In the short run price elasticity of supply is inelastic.
EN
B Over time price elasticity of supply becomes more elastic.
C Correct: In the short run price elasticity of supply is inelastic and in the long run it becomes
elastic.
D In the long run price elasticity of supply is elastic.
IM
8 C Rationale AO2
A Positive statement – testable hypothesis.
B Positive statement – testable hypothesis.
C Correct: value judgement.
D Positive statement – testable hypothesis.
E C
SP
10
Quantitative
Q Key Rationale AO
skills
9 C Rationale AO2
A If students incorrectly link an internal cost which concerns ‘eco-friendliness’ to an external cost.
B If students incorrectly link a cost which applies to environmentally-friendly equipment to an
external cost.
C Correct: Students correctly identify congestion costs as falling on a third party – the community.
D If students incorrectly link a cost which applies to moving products outside the factory to an
external cost in an economic sense.
10 A Rationale AO3 
EN
A Correct: An increase in supply, reduction in price and extension in supply would result in a
greater quantity being consumed.
B An increase in demand would increase price but supply would have to extend and not contract
to result in a reduction in under-consumption.
C A decrease in demand would cause price to fall rather than increase and will increase the
IM
problem of under-consumption.
D An increase in supply would cause a decrease in price but an extension in demand rather than a
contraction and an extension in demand would be needed to reduce under-consumption.
C
11 D Rationale AO2
A A government subsidy lowers the costs of production and causes the supply curve to shift to the
right. A contraction of the curve is caused by an increase in the price of good X.
E
B A change in price of the product causes a movement along the demand curve, not a shift.
C If the price of a substitute good increases there will be less demand for the substitute and more
SP
demand for good X, the demand curve will shift to the right.
D Correct: Wages are a cost of production. As costs of production fall a firm is able to produce
more units of product X to the market. The number of units supplied increases and the supply
curve shifts to the right.
12 D Rationale AO2 
A The original producer surplus.
B The new producer surplus.
C Not part of producer surplus.
D Correct: XZU - XYT.
11
Quantitative
Q Key Rationale AO
skills
A An increase in supply.
B A decrease in supply.
C Correct: Bus and tram travel are substitutes. A rise in bus fares would encourage some
travellers to switch to tram travel, causing demand to increase.
D A decrease in demand.
EN
A AFC
B MC
C Correct: AVC
D ATC
IM
15 C Rationale AO1
A The demand for health care would still fall should a higher price be charged.
B Health care will still be rival.
C Correct: Demand will exceed supply, so some method will have to be used to decide who will
C
be treated.
D There will be an opportunity cost as the resources which will be used could be utilised in
producing other goods and services.
E
SP
12
Question Answer Marks Guidance

16 (a) Accept any of the following: 1 For one mark:
Accept only a first answer. Any factor is acceptable.
(AO1 x 1)
Land [1]
Labour [1]
Capital [1]
Enterprise [1]
16 (b) Relevant answers may include: 4 Up to four marks:

an increase in the price of substitutes, One mark each for a relevant factor (to a maximum of two), plus
EN
(AO1 x 2
a fall in the price of complements, AO2 x 2)
one mark for each relevant elaboration in the context of butter
a change in tastes and preferences in favour of butter (again to a maximum of two).
or
rising incomes. Elaboration must be in the context of butter to achieve a mark and
can only be awarded where the first mark for
IM
e.g. An increase in the price of a substitute [1], for identification/knowledge has been given.
example margarine [1].
Do not credit “change” in the price of complements or substitutes
where the direction of the change is not clear.
C
Accept a fall in incomes if it is asserted that butter is an inferior
good.
16 (c)
E
Award 1 mark for incorrect rounding or incorrect
percentage change correctly applied.
2
(AO2 x 2)
Up to two marks:
Income Elasticity of Demand =
 24.47
= +12.24, accept 12.25
SP
2
 24.47
% Δ in QD = × 100 =  24.47% (2dp)
2
16 (d) The willingness [1] and ability to sell a product [1]. 2 Up to two marks:
(AO1 x 2)
16 (e) i Sustainability means using resources so as not to 2 Up two marks:
compromise future generations’ standard or quality of Award two marks for a clear explanation of sustainability, one
(AO1 x 2)
life. mark for an explanation which is less precise but which shows
13

some understanding of the term.
e.g. Sustainability means minimising negative
externalities on future generations, e.g. by using more
environmentally friendly forms of farming such as
organic farming. [2]
Sustainability means being more environmentally

friendly. [1]
EN
16 (e) ii e.g. By using more land for organic farming, this will 2 Up to two marks:
produce less food than conventional methods, meaning Two marks are awarded for a clear understanding of the fact that
(AO1 x 2)
supply falls and food becomes scarcer. [2] organic farming is less productive than traditional farming and
therefore reduces the amount of food produced and makes food
or Organic farming will reduce the amount of food scarcer.
IM
produced. [1]
An alternative but equally acceptable response may be that as
organic farming is more sustainable, this may reduce scarcity in
the long-run compared with unsustainable agriculture.
C
Candidates may respond in terms of opportunity cost which may
include a diagram and this is equally valid if correctly explained.
E The fact that land is scarce is of no pertinence as the question

asks for the effect of organic farming upon scarcity, not the impact
SP
of scarcity upon organic farming.
16 (f) Acceptable reasons would include anything that might 2 Up to two marks:
lead to an increase in the supply of organic food such Fig. 2 shows an increase in the amount of land devoted to the
(AO1 x 1
as: AO2 x 1)
production of organic foods.
an increase in the price of organic food
a fall in the price of other foods (or of the goods and One mark for the identification of a relevant reason. One further
services that could have been produced if the land had mark for an explanation of how that would increase the amount of
14

been put to an alternative use). land under cultivation for organic food.
It is also acceptable to argue that a decline in the Do not accept an increase in the demand for organic food without
productivity or efficiency of production could require the reference to price; it is the change in price that signals to
use of more land in order to meet existing demand. producers, not the change in demand.
e.g. An increase in the price of organic food [1] would Candidates may answer in terms of an increase in food production
mean farmers could make more profit from organic food in general, as there is nothing in Fig. 2 to suggest that this
and therefore use more of their land for organic food. increase has been at the expense of traditional farming.
EN
[1]
IM
E C
SP
15

16 (g) * Level 3 (7- 10 marks) 10
Good knowledge and understanding of a price elasticity of
(AO2 x 1
demand in the context of an indirect tax such as the AO3 x 4
Danish ‘fat tax’. AO4 x 5)
Strong analysis of the role of price elasticity of demand in

determining the impact of an indirect tax such as the
Danish ‘fat tax’. A relevant and accurately labelled
diagram is provided and is linked to the analysis.
EN
Good to Strong evaluation of the role of price elasticity of
demand in determining the impact of an indirect tax such
as the Danish ‘fat tax’.
Good evaluation would be awarded in the lower portion of
IM
the band and strong evaluation in the upper portion of the
band.
There is a well-developed line of reasoning which is clear
C
and logically structured. The information presented is
relevant and substantiated.
Level 2 (6-10 marks)

E
Good knowledge and understanding of a price elasticity of
demand in the context of an indirect tax such as the
SP
Danish ‘fat tax’. e.g. In the diagram above the imposition of a tax reduces the
amount of profit available to a firm at any given price, reducing
Good analysis of the role of price elasticity of demand in their incentive to supply and shifting the supply curve to the left
determining the impact of an indirect tax such as the (or alternatively meaning that they need to increase prices to
Danish ‘fat tax’. A relevant and accurately labelled maintain the same level of profit for a given level of output,
diagram is provided and is linked to the analysis. shifting the supply curve upwards). This increases the price to
P1 and causes a contraction of demand. If demand is relatively
Reasonable evaluation of the role of price elasticity of price elastic the fall in demand will be more than proportionate
demand in determining the impact of an indirect tax such to the increase in price, while the contraction would be much
as the Danish ‘fat tax’. smaller when demand is price inelastic. However, there are
other factors which will influence the effect of the tax. The size
of the tax will determine how far the supply curve shifts and
16

There is a line of reasoning presented with some therefore the size of the increase in price, which in turn will
structure. The information presented is in the most-part determine the size of the contraction in demand.
relevant and supported by some evidence.
This may be expressed in terms of the incidence of the tax and
Level 1 (1-3 marks) may be shown via two diagrams with different PEDs.
Reasonable knowledge and understanding of a price Alternatively, this could be demonstrated using numerical
elasticity of demand in the context of an indirect tax such examples, with a tax of the same size imposed on two goods
as the Danish ‘fat tax’. with different PED values and showing different effects on
quantity demanded, although this must make the same link
EN
Limited or no analysis of the role of price elasticity of between PED and the effectiveness of a tax.
demand in determining the impact of an indirect tax such
as the Danish ‘fat tax’. Evaluation may refer to other factors such as the effectiveness
of monitoring and the size of sanctions, which will determine
Limited or no evaluation the extent to which suppliers comply with the new tax.
IM
The information is basic and communicated in an
unstructured way. The information is supported by limited
evidence and the relationship to the evidence may not be
C
clear.
0 marks – no response or no response worthy of credit.
E
SP
17

17 * Level 4 (16-20 marks) 20 At Level 4 candidates may offer a nuanced conclusion,
Good knowledge and understanding of state provision of perhaps including “ifs” and “buts” in their conclusion. For
(AO1 x 3
education as a solution to education market failure. AO2 x 4
example, that state provision will correct the market failure
AO3 x 6 associated with education, but only if the policy makes
AO4 x 7)
Strong analysis of state provision as a method of education compulsory (this may be based on a reference to
correcting education market failure. A relevant and free state education being free at the point of consumption,
accurately labelled diagram is provided and is linked to the but with an opportunity cost to learners who delay their entry
analysis. to the labour force).
EN
Strong evaluation of the effectiveness of state provision It is possible, although not necessary, for candidates to
as a method of correcting education market failure. consider an alternative policy. This could qualify as analysis
or evaluation as appropriate provided that the alternative
There is a well-developed line of reasoning which is clear (e.g. regulation without state provision, subsidising
and logically structured. The information presented is education) is assessed relative to state provision.
IM
relevant and substantiated.
Arguments against state provision include that it is difficult to
Level 3 (11-15 mark) calculate the social benefit of education and it is therefore
Good knowledge and understanding of state provision of difficult to know exactly how much to provide. If the amount
C
education as a solution to education market failure. provided is too great or too small then government failure will
replace market failure. Increasing the number of people in
Good analysis of state provision as a method of correcting education will reduce the size of the workforce and with an
E
education market failure. A relevant diagram is provided
and is linked to the analysis.
opportunity cost in terms of the country’s productive potential.
There is also an opportunity cost to the government who
could have used the money (or other resources) used for
SP
Good evaluation of the effectiveness of state provision as education in other ways e.g. healthcare.
a method of correcting education market failure.
Candidates can clearly illustrate on a diagram the effect of
There is a line of reasoning presented with some structure. state provision. This is a difficult concept to illustrate
The information presented is in the most-part relevant and graphically and a range of diagrams would be acceptable.
supported by some evidence. This could be:
 a rightward shift of the supply curve
Level 2 (6-10 marks)
Reasonable knowledge and understanding of state
provision of education as a solution to education market
failure.
18
Reasonable analysis of state provision as a method of

correcting education market failure. A relevant diagram is
provided, which is less than perfect.
Reasonable evaluation of the effectiveness of state

provision as a method of correcting education market
failure, but without a judgement being made.
EN
The information has some relevance and is presented with
limited structure. The information is supported by limited
evidence.
Level 1 (1-5 marks)
IM
Limited knowledge and understanding of state provision
or market failure.
 a rightward shift of the demand curve as government
Limited or no analysis of state provision as a method of provision may send a signal that changes
C
correcting education market failure. consumers’ tastes and preferences.
Limited or no evaluation.
E
SP
evidence and the relationship to the evidence may not be
clear.
0 marks – no response or no response worthy of credit.
19
EN
IM
 A more interesting (if improbable) diagram may try to
incorporate an appreciation of state education being
free. This could be shown as a perfectly price elastic
C
supply curve at a price of 0, with an equilibrium
output equal to the socially optimal level of
consumption. An analysis of such a diagram may
E include an explanation of why the demand for

education at a price of 0 might be less than socially-
SP
optimal.
20
EN
IM
Candidates are able to explain clearly why the market for
education fails and why under-consumption occurs. They are
able to describe the (misperceived) private benefits of
C
education, such as an increase in income in the future or the
external benefits, which may include a more productive
workforce, greater tax revenue or an increase in innovation.
E Candidates recognise that the free market outcome is one of

SP
under-consumption. They are able to identify education as a
merit good and/or one with positive externalities.
21

18 * Level 4 (15-20 marks) 20 At Level 4 candidates may offer a nuanced conclusion,
Good knowledge and understanding of the operation of perhaps including “ifs” and “buts” in their conclusion. For
(AO1 x 3
buffer stocks in an agricultural market. AO2 x 4
example, that buffer stocks will work very well, provided that
AO3 x 6 the government rotates its buffer stock in order to prevent the
AO4 x 7)
Strong analysis of a buffer stock system as a method for wheat from perishing. It may be argued that the use of a
the United States government to use to maintain stability in buffer stock is in fact revenue-generating, since the wheat
the market for wheat. A relevant and accurately labelled should be bought when prices are at their lowest and sold
diagram is provided and is linked to the analysis. when they are at their highest.
EN
Strong evaluation of the effectiveness of a buffer stock It is possible, although not necessary, for candidates to
system as a method for the United States government to consider an alternative policy. This could qualify as analysis
use to maintain stability in the market for wheat. or evaluation as appropriate, provided that the alternative
(e.g. legally enforced minimum and maximum prices) is
There is a well-developed line of reasoning which is clear assessed relative to buffer stocks.
IM
and logically structured. The information presented is
relevant and substantiated. There may be a clear illustration of the mechanics of buffer
stocks in both increasing and reducing the price of wheat (as
Level 3 (11-15 marks) appropriate). Arguments in favour are clearly analysed and
may include the ability to maintain “fair” prices for consumers
C
Good knowledge and understanding of the operation of
buffer stocks in an agricultural market. and farmers and perhaps price stability in a macroeconomic
sense, guaranteeing continuity of food supplies etc.
E
Good analysis of a buffer stock system as a method for
the United States government to use to maintain stability in
the market for wheat. A relevant diagram is provided and
Arguments against include the opportunity cost to
government, the risk of the crop perishing and the money
SP
is linked to the analysis. being irretrievable, the possibility that this will encourage
inefficiency from farmers (particularly allocative inefficiency
Good evaluation of the effectiveness of a buffer stock as the government will guarantee them a price) and the
system as a method for the United States government to difficulty in establishing what the upper and lower bounds of
use to maintain stability in the market for wheat. a fair price are.
There is a line of reasoning presented with some structure. There may be a recognition that the supply of wheat is
The information presented is in the most-part relevant and perfectly (or almost perfectly – depending on the presence of
supported by some evidence. stocks) price inelastic in the short-run. There is a clear
explanation of the triggers for governments buying up and
selling off buffer stocks based on established minimum/floor
22

Level 2 (5-10 marks) and maximum/ceiling prices.
Reasonable knowledge and understanding of the
operation of buffer stocks in an agricultural market. At least one diagram shows the government acting to restore
the market to an acceptable equilibrium.
Reasonable analysis of a buffer stock system as a A diagram showing the need for and effect of government
method for the United States government to use to purchasing of wheat might be expected to look like the one
maintain stability in the market for wheat. A relevant below (the supply curve for wheat need not be perfectly
diagram is provided, which is less than perfect. inelastic). From an initial equilibrium at price P and quantity
Q, there is an increase in supply which shifts the supply
EN
Reasonable evaluation of the effectiveness of a buffer curve to the right from S to S1. This reduces price to P* below
stock system as a method for the United States the minimum acceptable price (decreed by government).
government to use to maintain stability in the market for Government then buys more wheat, which shifts the demand
wheat, but without a judgement being made. curve to the right from D to D1, increasing price within the
acceptable range to PMin.
IM
The information has some relevance and is presented with
limited structure. The information is supported by limited
evidence.
C
Level 1 (1-5 marks)
Limited knowledge and understanding of a government’s
ability to influence demand and supply through buying and
selling.
E
Limited or no analysis of a buffer stock system as a
method for the United States government to use to
SP
maintain stability in the market for wheat.
Limited or no evaluation.

evidence and the relationship to the evidence may not be A diagram showing the need for and effect of government
clear. sale of wheat (release of a buffer stock) might be expected to
look like the one below (again the supply curve for wheat
0 marks – no response or no response worthy of credit. need not be perfectly inelastic). From an initial equilibrium at
price P and quantity Q, there is an increase in demand which
shifts the demand curve to the right from D to D1. This
increases price to P* above the government’s maximum
23

acceptable price. Government then sells wheat, which shifts
the supply curve to the right from S to S1, reducing price
within the acceptable range to P.
EN
IM
Relevant knowledge may include:
a recognition that there is a need to maintain low prices for
C
consumers and/or sufficiently high prices to maintain supply.
Candidates understand that a buffer stock involves the
purchase of an excess supply of wheat in order to increase
E the price and/or release a supply of wheat in times of

shortage. Candidates can describe the problems of volatility
SP
in agricultural markets.
An identification that buffer stocks involve governments

purchasing and/or selling stocks of a product to eliminate
shortages or surpluses
24
Assessment Objectives Grid
Question AO1 AO2 AO3 AO4 TOTAL
1 to 15 7 6 2 15 (5)
16 (a) 1 1
EN
(b) 2 2 4
(c) (i) 2 2
IM
(c) (ii) 2 (2) 2 (2)
(d) (i) 2 2
C
(d) (ii) 2 2
(e) 1 1 2
(f)
E
1 4 (2) 5 (2) 10 (4)
SP
17 or 18 3 4 (2) 6 (3) 7 (3) 20 (8)
TOTAL 18 18 12 12 60 (19)
25

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© OCR 2016 [601/4801/9] H060/01 Turn over

Answer all the questions in this section.

1 Which of the following describes a free good?

4 Which of the following is a feature of a market economy?

A Competition ensures product differentiation

© OCR 2016 H060/01

5 An economy is allocatively efficient when:

6 Which of the following is a public good?

8 Which of the following statements is a normative statement?

© OCR 2016 H060/01 Turn Over

9 Which of the following is an external cost of production?

A The cost of a public relations campaign in support of a new ‘eco-friendly’ factory

Demand Supply Price

B Increase Contraction Increase

C Decrease Contraction Increase

D Contraction Increase Decrease

© OCR 2016 H060/01

A A government subsidy is given to There is a movement down the supply

B The price of good X The demand curve for good X shifts to

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Total output 0 100 200 300 400 500

© OCR 2016 H060/01 Turn Over

Answer all the questions in this section.

Food for Thought – Changing Patterns of Food Production and Consumption

© OCR 2016 H060/01

© OCR 2016 H060/01

Give your answer correct to two decimal places.

(d) (i) Explain what is meant by the term ‘sustainability’.

© OCR 2016 H060/01

© OCR 2016 H060/01

Answer question 17 or question 18

Evaluate, using an appropriate diagram(s), the effectiveness of state provision as a method

Evaluate, using an appropriate diagram(s), the effectiveness of a buffer stock system as a

© OCR 2016 H060/01

© OCR 2016 H060/01

© OCR 2016 H060/01

© OCR 2016 H060/01

© OCR 2016 H060/01

© OCR 2016 H060/01

© OCR 2016 H060/01

1. Mark strictly to the mark scheme.

5. Work crossed out:

7. There is a NR (No Response) option. Award NR (No Response)

Descriptor Award mark

12. Subject–specific Marking Instructions

Candidates may infringe the rubric in the following way:

 answering two questions from Section C.

USING THE MARK SCHEME

1 Transfer the mark awarded to the front of the script.

2 The maximum mark for the paper is 60.

Levels of response – Level descriptors

Knowledge and understanding/ Analysis Evaluation

Question Answer Marks Guidance

16 (b) Relevant answers may include: 4 Up to four marks:

Question Answer Marks Guidance

Sustainability means being more environmentally