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UNIVERSITY OF CAMBRIDGE INTERNATIONAL EXAMINATIONS GCE Advanced Subsidiary and Advanced level MARK purpose for the November 2005 appargonnt movement paper 9708 ECONOMICS 9708/04 piece of music 4, maximum raw mark 70 This mark contrivance is published as an concern to teachers and students, to contend the requirements of the examination. It shows the basis on which Examiners were initially instructed to award marks. It does non indicate the details of the discussions that to a faultk place at an Examiners meeting before marking began. Any substantial changes to the mark abstract that arose from these discussions pull up stakes be recorded in the published encompass on the Examination.All Examiners ar instructed that choice discipline wait ons and un evaluate approaches in candidates scripts must be eatn marks that fairly reflect the pertinent k nowledge and skills demonstrated. specialise schemes must be read in conjunction with the question papers and the Report on t he Examination. The minimum marks in these components needed for mixed grades were previously published with these mark schemes, exactly are now instead entangled in the Report on the Examination for this session. CIE will not enter into discussion or correspondence in connection with these mark schemes.CIE is publishing the mark schemes for the November 2005 question papers for most IGCSE and GCE Advanced Level and Advanced Subsidiary Level syllabuses and rough Ordinary Level syllabuses. foliate 1 strike out Scheme GCE AS/A LEVEL NOVEMBER 2005 Syllabus 9708 Paper 4 scratch A 1 (a) What turn up is there in the article that the UK mobile phone companies kick the bucket in an imperfect mart structure? Only four companies, can fix price, urinate carrefour differentiation in the handsets, no perfect knowledge. (b) beg off the statement one result will be that cross-subsidisation will disappear and the price of a new handset will go up intendably. exposition of meaning of subsidising one product or service by the meshwork on another(prenominal) which itself whitethorn be overpriced. The removal of the subsidy will result in the price of the subsidised product change magnitude if profit levels are to be maintained. Often the subsidised product makes a loss just now is produced because it is subsidiary to other profit making products or services. (c) The article says the determination of the High Court will represent the companies ? 1. 5 billion to ? 2 billion. Explain how the phone companies might react in order to defy their profit levels.Could audition to reduce labour costs, implement whatever redundancies, could stop research and instruction, could generally try to reduce costs or could try to increase revenue by promoting products through advertising. (d) Explain with the aid of a diagram how the existence of termination charges would affect consumer surplus. Termination charges are placed above the market level. Diagram should show a p rice above market leading which will result in reduction in consumer surplus. 1 mark for D/S diagram justly labelled 1 for showing the reduced area of consumer surplus 1 for bill. e) Does the information lead you to agree with the spokesperson when he said that consumers should not necessarily regard the decision as a good thing? In consumers intimacy they would save ? 700 just now over next three years, price reduction would be on all calls. Against consumers interest cost of telephone handset would rise there is a fear of change magnitude calls for text messages possibility of phone company finding more or less other way to keep profits high. 6 4 4 3 4 University of Cambridge outside(a) Examinations 2005 knave 2 Mark Scheme GCE AS/A LEVEL NOVEMBER 2005 Syllabus 9708 Paper 4General gossipmongers for Section B The essay questions carry a maximum mark of 25. set about not to bunch marks, moreover use the whole mark range. If there is any doubt in your mind, bestow the benefit of doubt to the candidate. The difference in grades should be assessed on the qualification of the candidate to demonstrate the various objectives of the examination listed in the syllabus and not purely on the expertness to itemise further details from the heart and soul of the syllabus. Marks should be awarded for the cogency to demonstrate that suffer (b) of the syllabus has been achieved as well as aim (a) which refers to content knowledge.It is the objective of the examination, as listed in the syllabus, to assess both these aims. An overall guide for marks for single questions is minded(p) below these are from a total of 25. They may be applied proportionally of run to parts of questions where the total is less than 25 Mark 1 9 (Linked to level one in individual question notes). 1-5 where the termination is mostly irrelevant and lone(prenominal) contains a few valid points make incidentally in an irrelevant context. at that place will also be substantial omissions of compendium. here the answer shows about knowledge besides does not indicate that the meaning of the question has been properly grasped. Basic errors of system or an inadequate development of analysis may be evident. 69 Mark 10 13 (Linked to level two in individual question notes). 10 11 where there is evidence of an ability to identify facts or some ability at graphs and/or a fair ability to apply known laws to new situations. There should be an accurate although budding explanation of the facts relating to the question unitedly with an explanation of the theory, and evidence of some bility to discriminate and form elementary judgements. Do not expect a go along logical presentation. There will not be much evidence of the ability to bonk unstated assumptions, nor to examine the implications of a hypothesis, nor of the ability to organise ideas into a new unity. 12 13 where the answer has a more thorough relevance to the question alone where the theory is inco mpletely explained. University of Cambridge International Examinations 2005 Page 3 Mark Scheme GCE AS/A LEVEL NOVEMBER 2005 Syllabus 9708 Paper 4 14 17 (Linked to level 3 in individual question notes). 4 15 where there is a good knowledge of the facts and theory of the question, clear evidence of the ability to use the facts and theory with accurate acknowledgement to the question that may have presented the candidate with a novel application. There should also be evidence, where appropriate, of the ability to examine the implications of the question and an judge to distinguish amongst facts and value judgements. Clear statements, supported by wakeless arguments should be given and there should be some onrush at a conclusion to the question. There should be a reasoned structure to the whole answer.Do not expect too some extra Illustrative points which are not explicitly referred to in the question, do not expect too much critical comment on unstated assumptions 16 17 for a n answer showing a well reasoned understanding of the questions requirements and of the relevant theory the analysis should be near though the simile and development may not be very full. 18 25 (Linked to level 4 in individual question notes). 18 20 where there is a thorough knowledge of the facts and theory with an splendiferous ability to describe, explain or analyse this in a precise, logical, reasoned manner.There should be an ability to query some of the assumptions in the question and clear evidence of an ability to distinguish between fact and value judgements and to draw some conclusions on the matter being discussed. Conclusions should be formed and expressed at heart a sound organise answer so that the whole is well presented. New illustrations and apposite examples should be introduced as further evidence of an ability to recognise the principles of the question and their application to relevant current situations. 1 25 for an answer which, given the time constrain t, could not be improved significantly it will have clear analysis, ample illustration and a good attempt at considered evaluation. Be positive in your marking, awarding marks for what is there without being too much influenced by omissions. Marks should not be deleted for inaccuracies. Corresponding marks for sub-sections. Total Mark 10 Total Mark 12 Total Mark 13 Total Mark 15 1 1-3 1-4 1-4+ 1-5 2 4-5 5-6 5-6+ 6-8 3 6-7 7-8 7-8+ 9-11 4 8-10 9-12 9-13 12-15 University of Cambridge International Examinations 2005 Page 4Mark Scheme GCE AS/A LEVEL NOVEMBER 2005 Syllabus 9708 Paper 4 Section B 2 (a) Explain what is meant by efficient resource allocation in a exculpate market. L4 L3 L2 L1 (b) For a sound explanation with clear understanding of the principles involved in the analysis. 8 10 For a competent explanation but with peculiar(a) development of the analysis. 6 7 For a localise explanation of a gratuitous market but budding explanation of allocative efficiency. 4 5 For a n answer which has some basal invent facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. 1 3 10 Would you agree that in some circumstances it is best to accept the decision such as that of the French political science and abandon the search for economic efficiency through the free market? 15 news of the reason for market failure. Monopolies, merit goods, public goods. Consideration of whether this might apply in the case of the large engineering company. L4 L3 L2 L1 For a reasoned discussion of causes of market failure and clearly structured answer. 12 15. For a fair explanation of market failure but lack of development and reasoned conclusion. 9 11 For a special(a) but acceptable attempt to consider some market failures. 6 8 For an answer which has some fundamental correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. 1 5 3 (a) Explain how trade unions can be incorporated into the economic analysis of wage determination. 12 Candidates are asked to comment on trade unions so the economic theory of wages that they should use is that for an imperfect market. This theory should be explained development marginal revenue productivity. sell unions can have an effect on the supply curve which is now no longer solely determined by market forces. Where the actual wage will be determined depends upon the relative strengths of the employer and the trade union. L4 L3 L2 L1 For a sound discussion with good explanation of the analysis and a clear understanding of the principles involved. 9 12 7 8 D and S approach For a competent comment but with limited elaboration of the analysis. 7 8 5-6 D and S approach For a correct explanation of part of the analysis. Candidates might explain all the political relation or the unions. 5 6 3+ 4 D and S approach For an answer which has some canonic correct facts but includes irrelevancies. Errors of theory or omissions of ana lysis will be substantial. 1 4 1 3 D and S approach University of Cambridge International Examinations 2005 Page 5 Mark Scheme GCE AS/A LEVEL NOVEMBER 2005 Syllabus 9708 Paper 4 (b) Discuss the possible effects that trade unions might have on the economy of a rural. 13 Trade unions could affect the supply of labour and working practices. They could cause production to decrease with consequent downward effects on income, spending and national income.Candidates could explain this exploitation the multiplier factor concept. Union could, however, through negotiation oppose disruption of production, or could monitor the implementation of safety procedures which might involve extra spending by the employer. This might well have an upward effect on national income. L4 L3 L2 L1 For a reasoned and clear explanation with accurate development of theory contrasting possible outcomes. 9 13 For a clear but un positive explanation which concentrates on change of income in one direction o nly. 7 8 For a limited attempt to consider the theory and with a greater concentration on the descriptive elements. 5 6 For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis are substantial. 1 4 4 (a) With the help of diagrams distinguish between normal profit and abnormal profit. 10 Diagrams to show normal and abnormal profit with accompanying explanation of the curves apply in the diagram. Candidates can distinguish between perfect and imperfect markets.L4 L3 L2 L1 For a sound explanation, good diagrams correctly labelled, with clear understanding of the principles involved in the analysis. 8 10 For a competent explanation but with limited development of the analysis. Diagrams clear but not fully labelled. 6 7 For a correct explanation of terms but some poor diagrams. 4 5 For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. 1 3 (b) Discuss whether firms always want to maximise profits and are able to do so in the way suggested by economic theory. 15 Discussion of the theory of profit maximisation. Candidates should consider not only whether it is possible to calculate marginal revenue and marginal cost to achieve profit maximisation but also whether the firm might have alternative aims. Sales maximisation, behavioural, managerial, satisficing, market share aims might be mentioned. L4 L3 L2 L1 For a reasoned discussion and clearly structured answer. 12 15 For a fair discussion but undeveloped answer mentioning either only one part of the question or both parts but only scant mention of alternative aims. 9 11 For a limited but acceptable attempt to consider the question with very limited development of either part. 6 8 For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. 1 5 University of Cambridge International Examinations 2005 Page 6 Mark Scheme GCE AS/A LEVEL NOVEMBER 2005 Syllabus 9708 Paper 4 5 How far do you agree that low interest rates and low inflation are the most important aims of government insurance policy in maximising economic welfare? 25 Discussion of the general macro aims of government policy with a comment on whether the two mentioned should be regarded as the most crucial. The effect of low interest rates and low inflation and possible links between them can be developed. Reasons should be given for either choosing or not choosing these aims as the most important. L4 L3 L2 L1 For a thorough explanation of the aims, a clear analysis of the link between them, a discussion of the possible outcome of a choosing either those aims or alternatives with a reasoned conclusion. 18 25 For a competent explanation of the aims but where there is only limited attempt to consider the significance of the importance of the aims. There will be some discussion but the evaluation will no t be fully developed or extensive. 14 17 For an accurate though undeveloped explanation with some attempt at analysis but only limited evaluation. 10 13 For an answer which shows some knowledge but does not indicate that the question has been fully grasped. The answer will have some correct facts but include irrelevancies. Errors of theory or omissions of analysis will be substantial. 1 9 6 With the approval of the Malaysian government, the Swedish company IKEA, the worlds largest retailer of theatre furnishings, has invested $106 million in Malaysia in the past three years. It plans to open another large store in the country, employing 450 concourse with expected sales of approximately $50 million in the first year. (Herald Tribune Aug 15 03 p 12) (a) Use the multiplier analysis to explain what effect this coronation might have on the Malaysian national income. 10 Discussion of the effect of increasing investment in terms of employment, income, spending, saving.Multiplier ana lysis. Usually this question is asked with reference to government spending and investment but this is a large investment and it also will have multiplier effects. L4 L3 L2 L1 For a sound explanation of the analysis and a clear understanding of the principles involved. 8 10 For a competent comment but with limited elaboration of the analysis. 6 7 For a correct explanation of part of the analysis. Candidates might explain how investment might increase income but might not deal with further increases in as they do not discuss what leakages occur at each round. 4 5 For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analysis will be substantial. 1 3 University of Cambridge International Examinations 2005 Page 7 Mark Scheme GCE AS/A LEVEL NOVEMBER 2005 Syllabus 9708 Paper 4 (b) Discuss whether the activities of multi-national companies are always beneficial. Candidates should discuss the effects of large companies. They cou ld consider whether a large company is beneficial for the shareholders, the workforce and the consumer. These groups may be in different countries.They should comment on the effect in host country where wages/incomes/employment might increase and on the possible benefits for directors (and shareholders) who may be in the home country. The multi-national might have chosen to operate in the host country because of reduced costs or cheaper inputs so a comment on the possible benefits of comparative advantage would be pertinent. L4 L3 L2 L1 For a sound discussion with good explanation of the analysis and a clear understanding of the principles involved. Reasoned evaluative comments should be given. 12 15 For a competent comment but with only limited evaluation of the effects. 9 11 For a correct discussion of the analysis but with only very brief, or no evaluation. 6 8 For an answer which has some basic correct facts but includes irrelevancies. Errors of theory or omissions of analys is will be substantial. 1 5 15 7 There are so many difficulties in bill living standards that we can never be sure that people in one country are better off than those in another country. Comment upon this statement. 25 Candidates should consider each part of the statement.They should discuss whether there are many difficulties in measuring living standards and give reasons for their conclusion on this part of the question. They should then consider whether it is possible to compare one country with another and discuss what use national income statistics might be. They should form an overall conclusion. L4 L3 L2 L1 For a thorough explanation of the difficulties of measuring living standards, and a clear conclusion to the assertion followed by a consideration of the usefulness of using the statistics to make comparisons. 18 25 For a competent explanation of the difficulties but with a limited conclusion.There will be some consideration of comparison between countries but this wil l not be fully developed or extensive. 14 17 For an accurate though undeveloped explanation with some attempt at analysis but only limited evaluation. The conclusion will be weak. 10 13 For an answer which shows some knowledge but does not indicate that the question has been fully grasped. The answer will have some correct facts but include irrelevancies. Errors of theory or omissions of analysis will be substantial. 1 9 University of Cambridge International Examinations 2005