Tuk-tuks, three-wheeled motorised rickshaws, are driven in a number of countries. India is the largest producer of the vehicle. India's largest tuk-tuk producing firm faces competition from firms at home and from imported tuk-tuks. The industry is becoming more capital-intensive and competitive but is still some way from perfect competition.

Mark scheme

Marking points from the official mark scheme (May/June 2016). The mark or mark type is shown in brackets.

1. [2] • A production method that uses a large proportion of capital (1) relative to labour (1).
2. [4] • Many buyers and sellers (1) making each firm a price taker/a very low market concentration ratio (1).
3. • Free entry and exit (1) absence of barriers to entry and exit/results in only normal profits being earned in the long run (1).
4. • Homogeneous product (1) an absence of anything that differentiates the product e.g. branding / demand for one firm's product will be perfectly elastic (1).
5. • Perfect knowledge (1) firms and buyers aware of profits/prices (1).
6. [6] • Difficulties controlling/managing the firm/managerial diseconomies (1) there are more layers of management in a large firm (1) may take longer to make decisions (1).
7. • Communication problems (1) there are more layers of communication/communication may be indirect (1) messages may be misinterpreted/take time to reach recipients (1).
8. • Labour diseconomies (1) Workers may feel less appreciated/have low morale (1) so may become demotivated (1) which could reduce labour productivity/efficiency (1).
9. • Poor industrial relations (1) industrial action e.g. strikes may occur (1) due to the time it takes to address workers' grievances (1) more people to argue with (1).
10. [8] Up to 5 marks for why they might:
11. • Imports may make available products not produced in the country (1) due to e.g. differences in climate/resources (1).
12. • Imports may increase choice (1) provide differentiated products (1) provide good quality products (1)
13. • Imports may be cheaper (1) this may also put pressure on domestic firms to improve the quality of their products (1).
14. • The price of imported raw materials may be cheaper (1) this could lower costs of production (1) lowering prices (1).
15. Up to 5 marks for why they might not:
16. • Imports may drive domestic firms out of business may be created and this may increase prices in the long run (2)
17. • A monopoly may be created which may reduce quality in the long run (2)
18. • Foreign firms may be engaging in dumping (1).
19. • Imports may be of harmful products/demerit goods (1) example (1) such products would harm people's health (1).