Market Dominance Market Failure

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Essay Question 1: 2009 A levels Q1 Governments around the world protect consumers against market failure due to market dominance. (a) Analyse, with supporting examples, how market dominance might lead to market failure. [10] (b) Assess the extent to which market dominance, rather than any other potential market failure, is the major cause of government intervention in the markets for goods and services within Singapore. [15] This was the most popular question on the examination pap er. There was a tendency to focus on a narrow range of reasons for market failure in both parts of this question. There was also a tendency to state rather than explain these reasons. Most candidates used appropriate diagrams as an analytic tool but once a gain too many of them stated rather than explained the conclusions that could be drawn from these diagrams. This made it difficult for candidates to gain Level 3 marks. (a) Overall the vast majority of candidates were able to show a knowledge of allocati ve efficiency and to present the appropriate diagram to illustrate how this leads to market failure. Regrettably only a small number explained this diagram, with most pre ferring to state the conclusion that P>MC in this case. This led to a mark at the top end of Level 2. A surprisingly small minority of candidates also explained productive and/or x-inefficiency and, in consequence, few candidates were rewarded with good Level 3 marks. (b) A similar pattern was repeated in the second part of the question. F or example, most candidates treated market failure only in terms of externalities or stated, rather than explained, a couple of alternative reasons for market failure (usually public goods a nd externalities). Thus there was evidence of only a partial under standing of the range of reasons for intervention or there was a lack of underlying analysis. It was pleasing

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