Mark Scheme (Results)

October 2023

Pearson Edexcel International

Advanced Level

In Economics (WEC13)
Unit 3: Business behaviour
Edexcel and BTEC Qualifications

Edexcel and BTEC qualifications are awarded by Pearson, the UK’s largest awarding body. We
provide a wide range of qualifications including academic, vocational, occupational and specific
programmes for employers. For further information visit our qualifications websites at
www.edexcel.com or www.btec.co.uk. Alternatively, you can get in touch with us using the
details on our contact us page at www.edexcel.com/contactus.

Pearson: helping people progress, everywhere

Pearson aspires to be the world’s leading learning company. Our aim is to help everyone
progress in their lives through education. We believe in every kind of learning, for all kinds of
people, wherever they are in the world. We’ve been involved in education for over 150 years,
and by working across 70 countries, in 100 languages, we have built an international reputation
for our commitment to high standards and raising achievement through innovation in
education. Find out more about how we can help you and your students at:
www.pearson.com/uk

October 2023
Question Paper Log Number P75612RA
Publications Code WEC13_01_2310_MS
All the material in this publication is copyright
© Pearson Education Ltd 2023
General Marking Guidance

• All candidates must receive the same treatment.

Examiners must mark the first candidate in exactly the
same way as they mark the last.
• Mark schemes should be applied positively. Candidates
must be rewarded for what they have shown they can do
rather than penalised for omissions.
• Examiners should mark according to the mark scheme
not according to their perception of where the grade
boundaries may lie.
• There is no ceiling on achievement. All marks on the mark
scheme should be used appropriately.
• All the marks on the mark scheme are designed to be
awarded. Examiners should always award full marks if
deserved, i.e. if the answer matches the mark scheme.
Examiners should also be prepared to award zero
marks if the candidate’s response is not worthy of credit
according to the mark scheme.
• Where some judgement is required, mark schemes will
provide the principles by which marks will be awarded
and exemplification may be limited.
• When examiners are in doubt regarding the application
of the mark scheme to a candidate’s response, the team
leader must be consulted.
• Crossed out work should be marked UNLESS the
candidate has replaced it with an alternative response.
Section A

Question Quantitative skills assessed Answer Mark

1 QS9: Interpret, apply and analyse The only correct answer is D (1)
information in written, graphical,
tabular and numerical forms. A is incorrect because this is
impacted by the demand for
labour
B is incorrect because the rate
of unemployment should fall
C is incorrect because an
increase in immigration would
increase the population
2 QS9: Interpret, apply and analyse The only correct answer is B
information in written, graphical, (1)
tabular and numerical forms A is incorrect because high
legal costs reduce
contestability
C is incorrect because patent
protection would reduce
contestability
D is incorrect because
regulatory capture is a form of
government failure
3 QS4: Construct and interpret a The only correct answer is A
range of standard graphical forms (1)
QS9: Interpret, apply and analyse B is incorrect because there
information in written, graphical, can only be super-normal
tabular and numerical forms. profits in the short-run
C is incorrect because it is not
operating at the MES
D is incorrect because price is
not equal to marginal cost
4 QS4: Construct and interpret a The only correct answer is C (1)
range of standard graphical forms
QS9: Interpret, apply and analyse A is incorrect because higher
information in written, graphical, rent would cause supernormal
tabular and numerical forms. profits to decrease
B is incorrect because higher
rent would cause supernormal
profits to decrease but the
price remains constant
D is incorrect because the
supernormal profit would
decrease and the price
remains constant
5 QS4: Construct and interpret a The only correct answer is C
range of standard graphical forms (1)
QS6: Calculate cost revenue and A is incorrect because this is
profit (marginal, average, totals) the AFC at 20 000 shirts
QS9: Interpret, apply and analyse B is incorrect because this is
information in written, graphical, the AFC at 15 000 shirts
tabular and numerical forms. D is incorrect because this is
the AFC at 5 000 shirts
6 QS8: Make calculations of elasticity The only correct answer is B (1)
and interpret the result
QS9: Interpret, apply and analyse A is incorrect because the
information in written, graphical, demand is more price elastic
tabular and numerical forms. in the daytime than the
evening.
C is incorrect because the
supply of seats in a cinema
would be perfectly inelastic
D is incorrect because the
elasticity of supply will not vary
between the daytime and
evening
Section B

Question With reference to Figure 2, calculate the percentage change in the price Mark
of the Model 3 Rear Wheel Drive vehicle between January and
October 2022.
Answer
7(a) Application 2

Quantitative skills assessed:

QS2: Calculate, use and understand percentages, percentage changes
and percentage point changes
QS9: Interpret, apply and analyse information in written, graphical,
tabular and numerical forms.

Up to 2 marks for calculation:

(266-280) = -14 (1)/ (266-280)/ 280 X100 (1)

(-14/280) x 100 = -5% (1)

NB: Award full marks for correct answer (5% or 5) regardless of

working
NB: Award full marks if negative sign is missing
(2)
Question Reference to Extract A, analyse two reasons why sales Mark
of electric vehicles in China increased.

Illustrate your answer with a supply and demand diagram.

Answer
7 (b) Knowledge 2, Application 2, Analysis 2
Quantitative skills assessed:
QS4: Construct and interpret a range of standard graphical forms
QS9: Interpret, apply and analyse information in written, graphical,
tabular and numerical forms.

Knowledge
Up to 2 marks for the diagram showing:
• Original supply, demand and equilibrium price and quantity (1)
• New equilibrium price and quantity having correctly shifted
demand (1)

Analysis
Up to two marks for reasons from Extract A, e.g.:
• Measures to reduce CO2 emissions in order to meet its climate
change goals by 2030 (1)
• Increasing the number of charging points (1)
• Raising the tax on non-electric vehicles (1)
• The global increase in the price of fuel has also led to an increase
in demand for electric vehicles (1)

Application
1 mark for correct shift of demand on diagram:
• Shift demand to the right (1)
1 mark for reference to change in sales:
• Between 2021 and 2022 the sales of electric vehicles in
China increased by 83% to 5.92 million (1)
(6)
Question With reference to Figure 1 and Extract B, Mark
explain the market structure that best
describes the electric vehicle market in China.
Answer
7(c)
Knowledge 2 Application 2

Quantitative skills assessed:

QS2: Calculate, use and understand percentages,
percentage changes and percentage point changes
QS9: Interpret, apply and analyse information in
written, graphical, tabular and numerical forms.

Knowledge:
1 mark for identification of oligopoly (1)
1 mark for identification of a characteristic of oligopoly
e.g.
• a few dominant firms/
• a high concentration ratio/
• interdependence/
• high barriers to entry/
• imperfect information/
• differentiated goods/
• non-price competition (1)

Application up to 2 marks for application to Figure

1 or Extract B (1+1):
Figure 1
• The three-firm concentration ratio is 53%/
The four-firm concentration ratio is 59%/
The five-firm concentration ratio is 64%/
The six-firm concentration ratio is 68% (1+1)
Extract B:
• The lower prices of Tesla’s electric vehicles had a
significant impact on its competitors/ Domestic and
other international manufacturers responded by (4)
reducing their prices for electric vehicles as they
competed for market share (1)
Question With reference to the first two paragraphs of Extract B, examine the impact of Mark
Tesla producing its electric vehicles in China on its costs and profits.
Illustrate your answer with a costs and revenues diagram.
Answer
7(d) Knowledge 2 Application 2 Analysis 2 Evaluation 2
Quantitative skills assessed:
QS4: Construct and interpret a range of standard graphical forms
QS9: Interpret, apply and analyse information in written, graphical, tabular
and numerical forms.
Decreasing costs

Knowledge
Up to 2 marks for drawing a diagram that shows knowledge of:
• Original AR, MR, AC1, MC1 and profit-maximising equilibrium (1)
• Original supernormal profit area P1FGC1 (1)
Analysis
Up to 2 marks for linked explanation of impact on Tesla’s profits e.g.:
• Decrease in AC causes a downward shift in MC and AC curves to MC2
and AC2 (1)
• Area of new supernormal profit identified P2HJC2 (1)
Application
Up to two marks for reference to Extract B:
• Tesla was able to take advantage of government subsidies aimed at
promoting the domestic electric vehicle industry lowering their costs
(1) Tesla benefited from low-cost labour (1)
• China has become a key manufacturing centre for Tesla, with the
Shanghai factory producing over 710 000 vehicles in 2022 (1)
• Tesla improved its efficiency from producing in Shanghai (1)
Evaluation
Up to 2 marks for evaluative comments, e.g.:
• Costs may have risen (1) as production has been difficult in China/
Tesla faced supply chain disruptions due to the global health crisis/
Tesla’s costs of production have risen/Tesla had to pay taxes on imported
components and finished vehicles (1)
• When the subsidies end costs will rise again reducing profit (1+1)
• As averages incomes in China rise the wages will rise
reducing the costs advantages (1+1)
Increasing costs

Knowledge
Up to 2 marks for drawing a diagram that shows knowledge of:
• Original AR, MR, AC1, MC1 and profit-maximising
equilibrium (1)
• Original profit area P1FGC1 (1)
Analysis
Up to 2 marks for linked explanation of impact on Tesla’s profits e.g.:
• Increase in MC and AC causes an upward shift in MC and
AC curves to MC2 and AC2 (1)
• Area of new supernormal profit P2HIC2 (1)
Application
Up to 2 marks for application to Extract B
• Production has been difficult in China (1)
• Tesla faced supply chain disruptions due to the global
health crisis (1)
• Tesla’s costs of production have risen (1)
• Tesla had to pay taxes on imported components and
finished vehicles (1)
Evaluation
• Costs may in fact have fallen (1) as Tesla was able to take
advantage of government subsidies aimed at promoting
the domestic electric vehicle industry lowering their costs
/Tesla benefited from low-cost labour/ China has
become a key manufacturing centre for Tesla, with the
Shanghai factory producing over 710 000 vehicles in
2022/ Tesla improved its efficiency from producing in
Shanghai (1)
• Depends on the proportion of total costs labour makes
up if it is capital intensive it will be less important (1+1)
• In the long run the supply chain problems will reduce (8)
helping to lower costs and increasing profits (1+1)
Question (e) With reference to the information provided and your own knowledge,
discuss the impact of Tesla reducing its prices on the behaviour of other
electric vehicle manufacturers.

Indicative content
7(e) Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with
the general marking guidance. The indicative content below exemplifies some
of the points that candidates may make but this does not imply that any of
these must be included. Other relevant points must also be credited.
Quantitative skills assessed:
QS9: Interpret, apply and analyse information in written, graphical, tabular
and numerical forms.

Knowledge, Application, Analysis (8 marks) – indicative content

Tesla has engaged in price competition

• Price competition is a type of competition where businesses compete
against each other by offering lower prices for their goods or services
• Tesla has tried to attract more customers and increase market share
by offering a lower cost alternative to other electric car producers
• Tesla’s current market share of 12% is below that of SAIC (25%) and
BYD (16%)
• Price leadership encouraged other electric car vehicle manufacturers to
lower their prices
• There might be a price war in the Chinese car market
• Reward appropriate game theory matrix, supported with explanation
• Some manufacturers may use non-price competition as means of
increasing their market shares e.g. advertising, branding, product
differentiation
• Tesla may be using limit pricing- the reduced prices are in place to
limit the profits- this may reduce the likelihood of competitors
entering the market to seek profit
• Predatory pricing is where the firm prices below its AVC in order to
put pressure on the competition to leave the market as they will be
loss making- this may result in loss of competitors/competitors
exiting the market
• Competitor may report Tesla to competition authorities for predatory
pricing
Level Mark Descriptor
0 No rewardable material.
Level 1 1–3 Displays isolated, superficial or imprecise knowledge and understanding of
economic terms, principles, concepts, theories and models.
Use of generic material or irrelevant information or inappropriate
examples.
Descriptive approach which has no chains of reasoning.
Level 2 4–6 Displays elements of knowledge and understanding of economic terms,
principles, concepts, theories and models.
Ability to apply knowledge and understanding to some elements of the
question. Some evidence and contextual references are evident in the
answer.
Chains of reasoning in terms of cause and/or consequence are evident but
they may not be developed fully or some stages are omitted.
Level 3 7–8 Demonstrates accurate and precise knowledge and understanding of
economic terms, principles, concepts, theories and models.
Ability to link knowledge and understanding in context using relevant
examples which are fully integrated to address the broad elements of the
question.
Analysis is clear, coherent, relevant and focused. The answer demonstrates
logical and multi-stage chains of reasoning in terms of cause and/or
consequence.

Evaluation (6 marks) – indicative content

• If electric vehicle manufacturers are able to differentiate their vehicles from
Tesla they may not need to compete over price
• There may be little impact on other vehicle manufacturers if they have a strong
reputation for reliability, safety and quality
• Other vehicle manufacturers in China benefit from government subsidies and
low wage costs. Therefore they can also lower prices and are not significantly
impacted
• If Tesla/other vehicle manufacturers experience increase in costs in the long-run
they may have to increase their prices
• Lower prices may decrease super-normal profits reducing the available capital to
spend on non-price competition
• Firms are interdependent and therefore they will all copy each other’s non-price
competition strategy
• Vehicle manufacturers do not benefit if a price war starts as they may all lose
revenue, reducing the incentive to continue to reduce prices
• SAIC is in a stronger position to withstand competition from Tesla given that its
market share is more than double that of Tesla
• Predatory pricing is illegal and Tesla may be fined/ lose consumer
confidence
Level Mark Descriptor
0 No rewardable material.
Level 1 1–2 Identification of generic evaluative comments.
No supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2 3–4 Evidence of evaluation of alternative approaches
Some supporting evidence/reference to context.
Evaluation is supported by a partially-developed chain of
reasoning.
Level 3 5–6 Evaluation recognises different viewpoints and/or is critical of
the evidence.
Appropriate reference to evidence/context.
Evaluation is supported by a logical chain of reasoning.
Section C

Question Evaluate policies that a government could use to control and regulate
monopolies, such as PTCL.
Illustrate your answer with an appropriate diagram(s).
Indicative content
8 Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of the
points that candidates may make, but this does not imply that any of these must
be included. Other relevant points must also be credited.
Quantitative skills assessed:
QS4: Construct and interpret a range of standard graphical forms.
QS9: Interpret, apply and analyse information in written, graphical, tabular and
numerical forms.
• Price regulation: prevents monopolies from charging a price much higher
than the price set under competitive market conditions. The government
will set a maximum price below the current price (PM to PC) to increase
allocative efficiency and reduce supernormal profits
• Limiting the amount of profit monopolies such as PTCL are allowed to
make. A maximum level of profit can be set equal to what the regulator
thinks a firm would earn in a competitive market.

• Performance targets: would increase the quality of services e.g. internet

services provided in Pakistan. The government would monitor the quality
of the service, e.g. speed, reliability and coverage and set targets to
improve, this increases the performance of the business and improves the
experience for the consumer
• Quality standards: the government could enforce standards e.g. to ensure
that PTCL improves the quality of the internet by imposing fines on PTCL if
it does not improve the quality of its service
 • Regulatory authorities can regulate against
anti-competitive practices such as predatory pricing or price discrimination.
These monopolies could be fined. This acts as a deterrent for monopolies and
discourages them from acting in a way that is negative for consumers
• Control mergers and takeovers to avoid the creation of monopolies. These
monopolies could distort the market by reducing quality and/or increase
prices. This would maintain the level of competition in the market maximising
consumer welfare
• Nationalisation: Government control of monopolies would change their
objectives to work in the interest of the consumer as the business would
not have a profit incentive
• Measures to reduce barriers to entry e.g. subsidies to new entrants;
reducing patent protection would increase competition in the market

NB if no diagram candidate can achieve a maximum of level 3

Level Mark Descriptor

0 No rewardable material.
Level 1 1–3 Displays isolated, superficial or imprecise knowledge and
understanding of economic terms, principles, concepts,
theories and models.
Use of generic material or irrelevant information or
inappropriate examples.
Descriptive approach which has no chains of reasoning.
Level 2 4–6 Displays elements of knowledge and understanding of
economic terms, principles, concepts, theories and models.
Limited application of knowledge and understanding to
economic problems in context.
A narrow response or superficial, only two-stage chains of
reasoning in terms of cause and/or consequence.
Level 3 7–9 Demonstrates accurate knowledge and understanding of
economic terms, principles, concepts, theories and models.
Ability to apply knowledge and understanding to some
elements of the question. Some evidence and contextual
references are evident in the answer.
Analysis is clear and coherent. Chains of reasoning in terms of
cause and/or consequence are evident but they may not be
developed fully or some stages are omitted.
Level 4 10–12 Demonstrates accurate and precise knowledge and
understanding of economic terms, principles, concepts,
theories and models.
Ability to link knowledge and understanding in context using
appropriate examples which are fully integrated to address
the broad elements of the question.
Analysis is clear, coherent, relevant and focused. The answer
demonstrates logical and multi-stage chains of reasoning in
terms of cause and/or consequence.
 Evaluation (8 marks) – indicative content
• Limiting profits can reduce dynamic efficiency. This might cause a lack of
productive efficiency in the long-run the fine for not meeting the
performance targets is too low, the monopoly would not have the
incentive to change its production methods/services
• A lack of regulatory power may stop the regulator from effectively
controlling the operations of the monopoly
• If price regulation is set too low, the monopoly may make a loss, reducing
the opportunity for dynamic efficiency or causing the monopoly to close
down
• Regulatory capture means the regulator may act in the interests of the
monopolists rather than consumers
• Unintended consequences e.g. reduced quality of service to consumer
• Information gaps mean the regulator does not have the required
information to effectively control and regulate monopolists
• Government failure may occur where government intervention results in
a net welfare loss

`
Level Mark Descriptor
0 No rewardable material.
Level 1 1–3 Identification of generic evaluative comments.
No supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2 4–6 Evidence of evaluation of alternative approaches.
Some supporting evidence/reference to context.
Evaluation is supported by a partially-developed
chain of reasoning.
Level 3 7–8 Evaluation recognises different viewpoints and/or
is critical of the evidence, leading to an informed
judgement.
Appropriate reference to evidence/context.
Evaluation is supported by a logical chain of
reasoning.
Question Evaluate policies that a government could use to reduce the geographical immobility
of labour and the occupational immobility of labour.
Refer to industries of your choice in your answer.
Indicative content
9 Indicative content guidance
Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of the
points that candidates may make, but this does not imply that any of these must be
included. Other relevant points must also be credited.
Quantitative skills assessed:
QS9: Interpret, apply and analyse information in written, graphical, tabular and
numerical forms.

Occupational immobility of labour refers to the difficulty that workers face in

switching between different occupations

Belgium has a skills shortage as unemployed people are unable to fill the vacancies
available. Policies to improve the occupational immobility of labour are therefore
needed

Policies to overcome occupational immobility of labour:

• Skills training programs: Governments may provide skills training programs
to help workers acquire new skills and move to a different occupation
• Apprenticeship programs: Governments may offer apprenticeship programs
e.g. in engineering or robotics, to provide training to increase vocational skills
and fill gaps in the market
• Education and training subsidies: Governments may provide subsidies to
support education and training programs for workers who are looking to
move to a different occupation e.g. subsidies for workers training for medical
professions
• Labour market information/support with job searches: Governments may
provide up-to-date labour market information to help workers make
informed decisions about their careers and the skills they need
• Support for small businesses: Governments may offer support to small
businesses to create new job opportunities and reduce occupational
immobility
• Tax incentives for employing workers: The government may offer tax
incentives to employers who hire individuals who are facing difficulty finding
work, such as those with disabilities

Geographical immobility of labour is the difficulty of workers moving from one

location to another

Policies to overcome geographical immobility of labour:

 • Relocation assistance: e.g. The Government provides financial support to
low-income workers/the unemployed who need to move for work, helping
them with the cost of moving
• Housing subsidies: providing housing subsidies to
low-income workers/the unemployed to help them afford to move to areas
with better job opportunities with high living costs
• Transportation infrastructure: Improving transportation infrastructure, such
as roads, train links and public transport, can make it quicker/easier for
workers to move to areas with job opportunities
• Labour market information: better provision of information about job
opportunities in different regions, to help workers make informed decisions
about moving
• Job creation in local areas: encourage job creation in areas with high
unemployment by providing tax incentives and other subsidies to businesses
that locate in these areas
• Regional/industrial policy e.g. freeports or joining a trading bloc/
common market to reduce national barriers to the mobility of labour

NB: award a maximum of level 3 for a response that does not refer to
industries
NB: award a maximum of level 3 for a response that does not consider both
types of immobility of labour
Level Mark Descriptor
0 No rewardable material.
Level 1 1–3 Displays isolated, superficial or imprecise
knowledge and understanding of economic
terms, principles, concepts, theories and models.
Use of generic material or irrelevant information
or inappropriate examples.
Descriptive approach which has no chains of
reasoning.
Level 2 4–6 Displays elements of knowledge and
understanding of economic terms, principles,
concepts, theories and models.
Limited application of knowledge and
understanding to economic problems in context.
A narrow response or superficial, only two-stage
chains of reasoning in terms of cause and/or
consequence.
Level 3 7–9 Demonstrates accurate knowledge and
understanding of economic terms, principles,
concepts, theories and models.
Ability to apply knowledge and understanding to
some elements of the question. Some evidence
and contextual references are evident in the
answer.
Analysis is clear and coherent. Chains of
reasoning in terms of cause and/or consequence
are evident but they may not be developed fully
or some stages are omitted.
Level 4 10–12 Demonstrates accurate and precise knowledge
and understanding of economic terms, principles,
concepts, theories and models.
Ability to link knowledge and understanding in
context using appropriate examples which are
fully integrated to address the broad elements of
the question.
Analysis is clear, coherent, relevant and focused.
The answer demonstrates logical and multi-stage
chains of reasoning in terms of cause and/or
consequence.
Evaluation (8 marks) – indicative content

Occupational immobility policies:

• There may be a lack of funding for policies to address immobility of
labour. If there is a lack of government funding or political will to
support these policies, they may not be implemented
• There could be structural barriers: factors such as discrimination or
lack of access to education and training could be causing the
immobility. Therefore, short-term policies are not likely to be
effective
• Workers might be resistant to changes in their occupations
• The market conditions could change, and policies aimed at
overcoming occupational immobility may not keep pace with these
changes, or may not be flexible enough to respond to shifting
labour market demands
• Workers may not have the skill level to retrain to fill gaps in the
market

Geographical immobility policies:

• Individuals may have strong personal and family ties that prevent
them from moving, such as caring for elderly relatives or having
children in school
• Workers may resist moving, especially if they are familiar with their
current community and have established social networks
• Policies are costly and require significant investment in
infrastructure. if there is a lack of government funding they may
not be implemented or be underfunded
• Time lags in building infrastructure may occur and the problem will
not be resolved in the short-run
• Workers may not have enough information about job opportunities
and the conditions in different regions, making it difficult for them
to make informed decisions about moving
Level Mark Descriptor
0 No rewardable material.
Level 1 1–3 Identification of generic evaluative comments.
No supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2 4–6 Evidence of evaluation of alternative approaches.
Some supporting evidence/reference to context.
Evaluation is supported by a partially-developed
chain of reasoning.
Level 3 7–8 Evaluation recognises different viewpoints and/or
is critical of the evidence, leading to an informed
judgement.
Appropriate reference to evidence/context.
Evaluation is supported by a logical chain of
reasoning.
Question Evaluate the impact that the size of a business has on its efficiency.
Illustrate your answer with an appropriate diagram(s).
Indicative content
Indicative content guidance
10 Answers must be credited by using the level descriptors (below) in line with the
general marking guidance. The indicative content below exemplifies some of the
points that candidates may make, but this does not imply that any of these must
be included. Other relevant points must also be credited.
Quantitative skills assessed:
QS4: Construct and interpret a range of standard graphical forms.
QS9: Interpret, apply and analyse information in written, graphical, tabular and
numerical forms.

• Larger businesses, such as Nestlé, might be more productively efficient

than smaller businesses (producing at the MES)
• Nestlé has access to more resources and economies of scale, which can
lead to increased efficiency compared to smaller food-producing
businesses
• Large production runs in producing food and beverages will lower unit
costs, and will enable fixed costs to be spread over a larger output. This
may enable the business to produce at the productively efficient level of
output

• The large businesses produce at Q2 compared to Q and is able to

produce at a lower cost C1
• Large businesses, such as Nestlé, have specialised division of labour or
capital equipment e.g. specialist packaging machines. These might
improve efficiency in production, lowering average cost when producing
at a higher level of output

• Large businesses might be more dynamically efficient

• The large business likely to have more price setting ability in the market
allowing them to set higher prices and make supernormal profits. The
supernormal profits can be reinvested into improving production or
better-quality capital, investing in research and development
 • Small businesses in perfect competition/monopolistic competition are
unable to make supernormal profits in the long-run and are therefore
unable to invest in improving dynamic efficiency
• Large businesses that are cross-subsidising might be more allocatively
efficient than smaller firms as they can reallocate profits to lower the
prices of essential goods
NB: award a maximum of level 3 if no appropriate diagram is drawn
Accept reverse argument as KAA
Level Mark Descriptor
0 No rewardable material.
Level 1 1–3 Displays isolated, superficial or imprecise knowledge and
understanding of economic terms, principles, concepts, theories and
models.
Use of generic material or irrelevant information or inappropriate
examples.
Descriptive approach which has no chains of reasoning.
Level 2 4–6 Displays elements of knowledge and understanding of economic terms,
principles, concepts, theories and models.
Limited application of knowledge and understanding to economic
problems in context.
A narrow response or superficial, only two-stage chains of reasoning in
terms of cause and/or consequence.
Level 3 7–9 Demonstrates accurate knowledge and understanding of economic
terms, principles, concepts, theories and models.
Ability to apply knowledge and understanding to some elements of the
question. Some evidence and contextual references are evident in the
answer.
Analysis is clear and coherent. Chains of reasoning in terms of cause
and/or consequence are evident but they may not be developed fully or
some stages are omitted.
Level 4 10–12 Demonstrates accurate and precise knowledge and understanding of
economic terms, principles, concepts, theories and models.
Ability to link knowledge and understanding in context using
appropriate examples which are fully integrated to address the broad
elements of the question.
Analysis is clear, coherent, relevant and focused. The answer
demonstrates logical and multi-stage chains of reasoning in terms of
cause and/or consequence.
Evaluation (8 marks) – indicative content
• A large business may suffer from diseconomies of scale making them less
productively efficient
• If suffering from x-inefficiency, the large firms’ average costs will rise
increasing productive inefficiency
• Small businesses may operate in a niche market where they are able to
set high prices and make super normal profits that can be reinvested
back into dynamic efficiency
• Large businesses may have less incentive to innovate and find more
efficient ways of doing things because of their dominant market position
and economies of scale
• A large business may suffer from inertia and be slow to respond to
changes in the market or to new opportunities because of their size and
investments in their existing operations
• A small business can be more productively and dynamically efficient than
large firms because they are often more flexible and responsive to
market changes. They have lower overhead costs, less bureaucratic
decision-making processes, and can quickly change their production
processes to meet the needs of customers
• A smaller business might be more allocatively efficient (P=MC). A
business in perfect competition has to take the market price where
P=MC=AC=AR=MR therefore are allocatively efficient because of their lack
of price setting ability. A larger business has price setting ability and can
set at a price above MC
Level Mark Descriptor
0 No evaluative comments.
Level 1 1–3 Identification of generic evaluative comments.
No supporting evidence/reference to context.
No evidence of a logical chain of reasoning.
Level 2 4–6 Evidence of evaluation of alternative approaches.
Some supporting evidence/reference to context.
Evaluation is supported by a partially-developed chain of reasoning.
Level 3 7–8 Evaluation recognises different viewpoints and/or is critical of the evidence,
leading to an informed judgement.
Appropriate reference to evidence/context.
Evaluation is supported by a logical chain of reasoning.

Released first on EDEXCEL AP DISCORD

https://sites.google.com/view/ap-edexcel/
Pearson Education Limited. Registered company number 872828
with its registered office at 80 Strand, London, WC2R 0RL, United Kingdom