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Economics · May / June 2024 · Paper 21 · Question 4

0455

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The question as text

Healthcare is in the tertiary sector. Healthcare provides both private and external benefits. In 2019, there were five mergers between large US healthcare firms. As well as operating in the US, US healthcare firms operate in a number of host countries, including Singapore.

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  • 4(a)[2]

    Define tertiary sector using an example apart from healthcare. The sector covering the provision of services (1). Example e.g. banking / car showroom / coffee shop / education (1). 2 Only accept the first example given.

  • 4(b)[4]

    Explain the difference between a private benefit and an external benefit of healthcare. Logical explanation which might include: A private benefit is enjoyed by the person consuming the product (1)

    e.g. a person may enjoy better health / longer life expectancy (1). OR A provider of healthcare e.g. hospital (1)

    and revenue / profits made (1). An external benefit is a benefit enjoyed by a third party / someone not directly involved in the consumption or production of the product (1)

    e.g. less risk of catching a virus when other people are vaccinated / higher output (1). Mark

  • 4(c)[6]

    Analyse why a government may prevent a horizontal merger. Coherent analysis which might include: A horizontal merger is a merger between two firms in the same industry and same stage of production (1). A government may prevent a merger if it thinks it will give the new firm monopoly power (1)

    and result in market failure (1). Less competition may result in higher prices (1)

    lower quality (1)

    there may be a substantial loss of jobs (1)

    through rationalisation (1). A government may be concerned that the new firm may be too large (1)

    may experience diseconomies of scale (1)

    example (1)

    may become less internationally competitive (1)

    lower exports (1). A government may want to avoid a reduction the number of suppliers (1)

    resulting in less choice for consumers / less innovation (1). 6 Note: need both same industry and same stage of production to get the mark for horizontal merger. Mark

  • 4(d)[8]

    Discuss whether or not a foreign multinational company (MNC) will continue to produce in a host country for many years. In assessing each answer, use the table opposite. Why it might:

    may earn a high revenue / profit due to high demand
    may experience low costs due to low wages / low raw material costs in the country
    may have access to high quality labour due to good education and training in the country
    may be subsidised by the host country’s government. Why it might not:
    natural resources it was extracting may run out
    tax in the host country may increase
    a rise in the host country’s foreign exchange rate may increase the price of its exports
    there may be industrial action undertaken by trade unions in the host country
    more profitable opportunities may occur in other countries
    may be changes in regulations. 8 See Guidance table at the end of the mark scheme. Mark
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