Economics · Oct / Nov 2016 · Paper 23 · Question 1
2281
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The question as text
Fishing in Mauritania Much of Mauritania’s land is desert and regular droughts put pressure on the country’s supply of food. The African country does, however, have the advantage of coastal waters which are among the world’s most plentiful ocean fishing grounds. Approximately 95% of the fish caught by Mauritania’s small fishing vessels are exported. Earnings from the sale of fish abroad contribute to the current account of the country’s balance of payments. In 2013 the country had a trade in goods surplus and a current transfers surplus. There is little processing of the fish into higher value products in Mauritania, except at a small number of factories at Nouakchott, the country’s capital. This failure to process the fish is having an impact on the country’s earnings from the fish it catches and on its economic growth. The country’s total output did actually increase from US$8 billion in 2012 to US$8.5 billion in 2013. That year also saw a change in the country’s population. The birth rate was 31.83, the death rate was 8.35 and the migration rate was –0.85 per thousand of the population. Some economists in Mauritania criticise their government for allowing other countries, including Algeria, Morocco, Japan and Russia, to catch large quantities of fish in Mauritania’s waters. They have recently objected to the government signing an agreement with the European Union (EU) that allows more than one hundred large EU vessels to fish in Mauritania’s waters in return for a payment of US$105 million per year. These EU vessels, with their highly skilled workers, are catching large volumes of fish, including highly valued squid, and are thought to be threatening the sustainability of Mauritania’s fishing industry. Mauritanian economists are predicting that fish stocks could decline significantly in the next twenty years. The country’s economy is currently heavily dependent on the primary sector. Improvements in the productivity of both its fishing and agricultural industries would help to reduce both the unemployment and poverty in the country.
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1(a)[2]
Describe the opportunity cost of Mauritania exporting fish. [2]
Opportunity cost is the (next) best alternative foregone (1). The opportunity cost here may be Mauritania consuming the fish / producing other products / exporting other products (1)
or Mauritania processing the fish (1).
1(b)[3]
Calculate Mauritania’s economic growth rate in 2013. [3]
6.25% (3). Correct working: US$0.5bn/US8bn x 100 / or 6% / or 6.25 (2). GDP increased by US$0.5bn (1).
1(c)[4]
Using information from the extract, draw a demand and supply diagram to show the effects of the predicted change in fish stocks on the market for fish. [4]
Axes correctly labelled – price and quantity or P and Q (1). Demand and supply curves correctly labelled (1). Supply curves shown shifted to the left (1). Correct equilibriums identified either by lines drawn to both axes or equilibriums points identified e.g. E and E1 (1).
1(d)[2]
State the two parts of a country’s current account balance not identified in the extract. [2]
Trade in services balance/services/invisible balance (1). Income balance / income / income flows (1). D D S S1 S1 S P Q Q1 P1 O price quantity
1(e)[4]
Analyse two reasons why the average cost of the EU fishing industry is lower than the Mauritian fishing industry. [4]
The EU fishing industry has larger fishing vessels (1)
benefit from economies of scale /technical economies of scale (1)
as a result costs e.g. fuel/labour costs per unit of fish caught will be lower/costs can be spread over a higher output (1). EU fishermen are more skilled (1)
higher productivity / more efficient (1). Note. Accept analysis based on why the Mauritian fishing industry has higher average cost.
1(f)[5]
Discuss whether a decrease in unemployment will always reduce poverty. [5]
Up to 3 marks for why it might: Lower unemployment may increase incomes (1)
higher incomes enable people to buy more basic necessities (1)
more likely to be able to educate children (1)
reduce future poverty (1)
reducing absolute poverty (1). Less expenditure by government on benefits (1)
enables government to increase spending on education/healthcare (1)
reducing gap between rich and poor (1)
Up to 3 marks for why it might not: A decrease in unemployment does not necessarily mean a rise in employment/income (1)
unemployment could fall due to e.g. people retiring early (1)
or emigrated (1)
Unemployment may fall and relative poverty may increase (1)
gap between rich and poor may rise (1). Income may still be below others (1)
relative poverty remains (1)
Income may still not be enough to afford basic necessities (1). Lower unemployment may increase inflation (1)
making it more difficult for some people to buy basic necessities (1). Increased employment results in higher tax revenue for the government (1)
which enables them to spend on education/healthcare etc. that support the poor (1).
1(g)[4]
Using information from the extract, explain whether the population of Mauritania increased or decreased in 2013. [4]
Increased (1)
birth rate exceeded death rate (1)
by 23.48 (1)
natural increase (1)
natural increase is greater than the loss from net emigration (1)
by 22.63 (1). Note. Accept a numerical approach to the question. If state population increases at a rate of 22.63 (per 1,000) award all 4 marks.
1(h)[6]
Discuss whether an economy should or should not conserve its fish stocks. [6]
Up to 4 marks for why it should: May avoid depleting fish stocks (1)
enabling fishing to continue in the future / benefit future generations / reduce imports in the long-term (1)
reduces pollution from overfishing (1)
preserves the eco system (1). Global demand may currently be lower (1)
demand may be higher in the future (1). The country’s skills catching and processing the fish may grow in the future (1). Country should not be reliant on fishing (1)
government should seek to develop other industries whilst fishing stocks last / develop fish processing so that same value of exports but fewer fish caught (1)’ Up to 4 marks for why it should not: May reduce income (1)
and employment now (1). May reduce export revenue (1)
worsen the current account position (1). Demand may fall in the future (1)
so income earned in the future may be lower in the future (1). Conservation may not work (1).
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