A-LevelEconomicsThe price system and the microeconomy9708/32 · Oct/Nov 2017 · Q101 Mark

Increased advertising by a firm in an imperfectly competitive industry leads to an increase in demand for the industry's product but a fall in the firm's profits. What could help to explain this? A Production is subject to diseconomies of scale. B Rival firms respond by increasing their advertising outlays. C The demand for the industry's product is price-inelastic. D The increase in demand for the firm's output is entirely at the expense of other firms.

Mark scheme

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

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Topic: The price system and the microeconomy, A-Level Economics (syllabus 9708). Structured question, 1 mark.
Source: A-Level Economics, Oct/Nov 2017 Paper 3 Variant 2, question 10.

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