Economics · May / June 2020 · Paper 21 · Question 3
0455
As printed in the paper
The question as text
There is a smaller proportion of large firms in Africa than in Asia. The two African countries with the largest firms are Nigeria and South Africa. These two countries’ firms have more capital goods than most other African countries’ firms. Firms in South Africa produce a range of products including gold and petrochemicals. In recent years, a number of African firms have developed into multinational companies (MNCs), producing mainly in other African countries.
Read automatically from the paper; the printed page above is exact.
Show the answer and mark scheme
3(a)[2]
Define a capital good. Human-made good (1)
used in production/used to produce other goods and services (1).
3(b)[4]
Explain two challenges facing small firms. Logical explanation which might include: Lack of finance/difficulty raising finance (1)
banks may be more reluctant to lend to small firms (1). May not be able to take advantage of economies of scale (1)
may have higher average cost (1). Not well known (1)
difficult to attract consumers (1). May face fierce competition from large firms (1)
which may lower their prices/spend more on advertising (1). Risk of failure (1)
due to inexperience of owners (1).
3(c)[6]
Analyse, using a demand and supply diagram, how a rise in income may affect the market for gold. Up to 4 marks for the diagram: Axes correctly labelled – price and quantity or p and q (1). Demand and supply curves correctly labelled (1). Demand curve shifted to the right (1). Equilibriums – shown by lines P1, P2/Q1, Q2 or marking the equilibrium points E1 and E2 (1). Up to 2 marks for logical analysis: An increase in income will increase people’s ability to buy gold/raise purchasing power (1). Price will rise/quantity traded will rise (1).
3(d)[8]
Discuss whether or not MNCs increase production and productivity in their host countries. In assessing each answer, use the table below. Level Description A reasoned discussion which accurately examines both sides of the economic argument, making use of economic information and clear and logical analysis to evaluate economic issues and situations. One side of the argument may have more depth than the other but, overall, both sides of the argument are considered and developed. There is thoughtful evaluation of economic concepts, terminology, information and/or data appropriate to the question. The discussion may also point out the possible uncertainties of alternative decisions and outcomes. 6–8 A reasoned discussion which makes use of economic information and clear analysis to evaluate economic issues and situations. The answer may lack some depth and development may be one-sided. There is relevant use of economic concepts, terminology, information and data appropriate to the question. 3–5 There is a simple attempt at using economic definitions and terminology. Some reference may be made to economic theory, with occasional understanding. 1–2 A mark of zero should be awarded for no creditable content. Why they might:
may have high demand for their productsmay create demand for raw materials from domestic firmsmay bring new technology and working practices into the countriesmay train workersmay pay higher wages which may motivate workers. Why it might not:may drive some domestic firms of businessmay deplete natural resources, reducing output in the futuremay have long/unsociable working hoursmay generate external costs including pollution which may reduce the health of workers. Limit to level 2 if only production or productivity is considered.
Make a free account to save your answers and see your weak topics and ask the AI why a wrong answer is wrong.