In 2020, some firms in Suriname, a South American country, stopped production. This was because the firms could not cover their variable costs, as well as some of their fixed costs. The reduction in the country's output resulted in a rise in its unemployment rate. The government used supply-side policy measures to reduce unemployment. In 2021, the number of firms in some markets fell again, but this time it was when output was rising.

Mark scheme

Marking points from the official mark scheme (Oct/Nov 2023). The mark or mark type is shown in brackets.

1. [2] Not sufficient to state a cost that does not change.
2. Accepting electricity / electricity bills and wages.
3. A cost that does not change with output / a cost that has to be paid even when output is zero (1) e.g. rent (1).
4. [4] Allow explanation of two types of frictional unemployment i.e. search, casual or seasonal and two types of structural unemployment i.e. regional and technological. Also allow voluntary and involuntary.
5. One mark each for each of two types identified and one mark each for each of two explanations.
6. Logical explanation which might include:
7. frictional unemployment (1) workers in between jobs (1)
8. structural unemployment (1) changes in demand and supply conditions / skills not matching vacancies / lack of labour mobility (1)
9. cyclical / demand-deficient unemployment (1) lack of total demand / occurs during a recession (1)
10. [6] Reward the same point e.g. 'raise productivity' only once.
11. Accept lower interest rate if linked to encouraging investment.
12. Coherent analysis which might include:
13. Education (1) can increase qualifications / literacy rate (1) training (1) can increase skills / productivity / quality of labour (1) raise mobility / increase job opportunities (1) reduce structural unemployment (1).
14. Lower income tax (1) reduce unemployment benefit (1) increases the incentive for the unemployed to find work quickly (1) reduce frictional unemployment (1).
15. Lower corporation tax / tax incentives (1) encourage firms to invest / expand output (1).
16. Privatisation (1) deregulation (1) can increase efficiency (1) reduce firms' costs (1) enabling firms to afford more workers (1).
17. Reform of trade unions / labour market reforms (1) Deregulation / removing labour regulations (1) making it easier to hire and fire workers (1).
18. Government spending on infrastructure (1) can reduce firms' costs of production / reduce transport costs (1) encouraging firms to expand (1) increase labour mobility (1).
19. Minimum wage legislation (1) reducing may encourage employer to employ more workers / increasing may encourage the unemployed to search more actively for work (1).
20. Subsidies (1) encouraging firms to expand / prevent firms going out of business (1).
21. Better/more healthcare (1) can increase productivity / reduce working time lost (1).
22. [8] In assessing each answer, use the table opposite.
23. Why it might:
24. firms may be larger, may be able to benefit from economies of scale
25. economies of scale may include e.g. financial, managerial, technical
26. lower costs may result in lower prices
27. firms may have more market power - firms may make more profit and may reinvest which can improve quality
28. firms may have moved to another market in response to changes in consumer demand
29. firms that were creating pollution and other external costs may close down
30. may reduce the time consumers spend shopping around
31. Why it might not:
32. firms may experience diseconomies of scale
33. diseconomies of scale may include e.g. communication problems, control problems and poor industrial relations
34. less choice
35. lack of competition / move towards monopoly resulting in lower quality and higher prices
36. lower availability.