A-LevelEconomicsGovernment microeconomic intervention9708/23 · Oct/Nov 2017 · Q120 Marks

The world market for rice Table 1: The World Price of Rice (World average price index, 2004 = 100) Year | Rice Price Index ---- | --- 2011 | 242 2012 | 231 2013 | 233 2014 | 235 2015 | 211 Source: F.A.O. The market for rice is more distorted than that for any other basic food. Content removed due to copyright restrictions Rice-exporting countries should encourage this by dismantling controls of their own. Source: adapted from The Economist, 14 November 2015

(a)Using Table 1, calculate the percentage change in the price of rice from 2014 to 2015.[2]
(b)Explain how rice farmers in Japan benefit from subsidies on fertilisers, power and water. Use a diagram to support your answer.[3]
(c)Explain how minimum prices will protect the interests of rice farmers. Consider whether the minimum price can be sustained in the long run.[5]
(d)Explain how the principle of comparative advantage might be used to justify Thailand and Vietnam specialising in rice production and Japan specialising in some other product.[4]
(e)Discuss the advantages and disadvantages of rice-importing countries removing their controls on the rice market. Consider whether on balance the controls should be kept.[6]

This question uses a diagram from the original paper, which isn't shown here. Open the full paper from the past papers archive to see it.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2017). The mark or mark type is shown in brackets.

[2] The price of rice fell (1 mark) by 10.2% (1 mark)
[3] For a supply and demand diagram that shows a shift to the right of the supply curve (1 mark) and the fall in price and increase in quantity (1 mark) because the firm enjoys a fall in costs (1 mark)
[2] For explaining that a minimum price set above equilibrium will raise price (1 mark) and support the income/revenue/profit of the farmers (1 mark).
[2] For explaining that the minimum price can only be maintained if the government can manage the surplus that will arise.
[1] For evaluative comment upon the likelihood that the government can sustain the minimum price in the long run.
[2] For a clear understanding that comparative advantage is based upon different opportunity cost (1 mark) and this leads to specialisation and trade (1 mark).
[2] For explaining that comparative advantage depends upon factor endowment (1 mark) and for application drawn from the data that indicates that Thailand and Vietnam should specialise in rice. (1 mark)
[3] For an analysis of the advantages of removing controls
[3] For an analysis of the disadvantages of removing controls
[1] Reserve 1 mark for a conclusion.

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