Kaizen High & Junior
Mock Exmination 2025
CANDIATE NAME:
A2
Economics paper 4
2 Hour
Additional Martial: Answer sheet
INSTRUCTIONS
● Section A
Compulsory Question
Section B
Attempt any one Question
Section c
Attempt any one Question
● Use a black or dark blue pen. You may use an HB pencil for any diagrams or graphs.
● Write your name, canter number and candidate number in the boxes at the top of the page.
● Write your answer to each question in the space provided.
● Do not use an erasable pen or correction fluid.
● Do not write on any bar codes.
● You may use a calculator.
● You should show all your working and use appropriate units.
INFORMATION
● The total marks for this paper is 60.
This document consists ….of printed pages
[Turn over]
2
Section A
Answer all parts of Question 1.
1 Competition, monopoly and the market
Firms are sometimes thought of as machines: inputs go in, products come out. However, it matters
how powerful these firms are allowed to become.
Competition law – the law that governs how firms compete in the market, how they may exert their
power and how and when they may join forces – has not prevented high concentration ratios in
many industries.
Global monopolies have been created in the name of ‘free market’ capitalism. Mergers have been
approved and monopolies tolerated under the assumption that they are efficient. Their ability to
enable innovation is relied upon to justify these monopolised industries.
Competition law is being used to protect a narrow set of public interests based on the idea of
‘consumer welfare’. The test applied by the law is whether any change will result in lower prices
for consumers and thus is beneficial. This is regardless of how monopolised the resulting market
structure becomes.
The logic that focuses on consumer prices is flawed. This can be seen in the impacts of firms on
the environment. Prices do not capture the negative externalities of production, for which neither
the producer nor the consumer pays.
Low consumer prices are not an adequate indicator for consumer welfare. The low price/low
wage spiral keeps pushing for cheaper goods and services to increase the profitability of the firm.
The result is that workers are paid less. Low prices cause unequal bargaining positions between
powerful employers and workers, and between powerful buyers and small independent suppliers.
Regulation has a role to play in protecting consumers from the worst abuses of market power by
firms. There needs, however, to be new competition law that promotes the free market rather than
the desires of the monopoly firms. It needs to consider the balance of power between the public
sector and private enterprise.
Source: RSA Journal. Issue 3, 2020 p 32.
(a) The article refers to concentration ratios. Explain what is meant by a concentration ratio and
how it is calculated. [4]
(b) Explain, with an example, whether the article is correct in saying that neither the producer nor
the consumer pays for negative externalities. [4]
(c) Apart from negative externalities, describe two reasons why the article says increased
concentration in an industry may not improve consumer welfare. [4]
(d) The article says that monopolies are tolerated because they are efficient.
Assess, with the help of a diagram, whether economic theory supports the idea that
monopolies are efficient. [8]
3
Section B
Answer one question.
EITHER
2 To improve allocative efficiency economists frequently advise governments to remove existing
subsidies to the private sector providers of education.
With the help of a diagram, evaluate this advice. [20]
OR
3 Some firms frequently use price discrimination.
Assess the view that when this occurs, price discrimination will always benefit the producer at the
expense of the consumer and society. [20]
Section C
Answer one question.
EITHER
4 An increase in a government’s budget surplus will increase unemployment in the short run but it
will make it easier to control a balance of payments deficit on the current account in the long run.
Evaluate this statement. [20]
OR
5 To what extent do you agree that an increase in productivity will lead to a higher standard of living
in low-income countries? [20]
