A-LevelEconomicsBasic economic ideas and resource allocation9708/42 · Oct/Nov 2017 · Q225 Marks

In many countries there is a concern about the rate of unemployment.

(a)A country moved from a point within its production possibility curve to a point on its production possibility curve. Explain what is meant by economic efficiency. Analyse what happened to economic efficiency in that country as a result of this movement.[12]
(b)Discuss whether government intervention in the economy is a necessary and sufficient condition for overcoming inefficiency in resource allocation.[13]

Mark scheme

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

[12] Explanation of meaning of economic efficiency and explanation of the analysis which ensures an efficient optimum may be reached. Productive efficiency will increase but it is not possible to tell whether this movement to the curve achieves allocative efficiency.
L4 for a thorough explanation dealing with productive and allocative efficiency and a comment on both efficiencies in relation to the PPC. 9–12
L3 for a competent but less developed explanation of both the terms or a developed explanation of one of the terms with accurate but limited discussion about the movement. 7–8
L2 for a correct but brief explanation with some attempt at analysis possibly with only one type of efficiency correctly elaborated. 5–6
L1 For an answer that has some basic correct facts but includes irrelevancies and errors of theory 1–4
[13] Individual actions are not always best for society as a whole. Discussion of reasons for market failure and necessity/desirability of government intervention to achieve efficiency. This could be by persuasion (nudge theory) rather than by enforcement. Nudge theory, originally an ethical idea not a government manipulative tool, involves designing choices to encourage decision making in wider positive interests of society. But it can be used in government context. Government intervention may thus be necessary, but it need not be sufficient to overcome inefficiency as there may be inefficiency in government through lack of information.
L4 for an accurate discussion of market failure, with examples and a conclusion about the need for government intervention and whether such intervention is necessary and sufficient. 9–13
L3 for a more limited discussion of the reasons for market failure and the need for government but without a comment on whether such intervention is sufficient to overcome market failure 7–8
L2 for a brief analysis of market failure with few examples and no conclusion about necessity or sufficiency 5–6
L1 For an answer that has some basic correct facts but includes irrelevancies and errors of theory 1–4