Practise linking fixed factors and falling marginal product to rising marginal cost, using product data, TP, MP and AP curves, and short-run cost relationships.
Explain the differences between economies of scale and the law of diminishing returns.
Candidates may include:
- a definition of economies of scale
- a definition of the law of diminishing returns
- a distinction between the short run and the long run
- a distinction between fixed and variable factors of production
- an explanation of economies of scale as a long-run phenomenon
- an explanation of the law of diminishing returns as a short-run phenomenon
- use of diagrams to illustrate economies of scale
- use of diagrams to illustrate the law of diminishing returns that may be product curves and/or short run cost curves.
Candidates who incorrectly label diagrams cannot be rewarded with full marks.
Examiners should be aware that candidates may take a different approach which if appropriate, should be rewarded.
Assessment Criteria
| Level | Marks | |
|---|---|---|
| 0 | Completely inappropriate answer. | 0 |
| 1 | Little understanding of the specific demands of the question. Very little recognition of relevant economic theory. Relevant terms not defined. Significant errors. | 1–3 |
| 2 | Some understanding of the specific demands of the question. Some recognition of relevant economic theory. Some relevant terms defined. Some errors. | 4–6 |
| 3 | Understanding of the specific demands of the question. Relevant economic theory explained and developed. Relevant economic terms defined. Few errors. Where appropriate, diagrams included. | 7–8 |
| 4 | Clear understanding of the specific demands of the question. Relevant economic theory clearly explained and developed. Relevant economic terms clearly defined. No major errors. Where appropriate, diagrams included and explained. Where appropriate, examples used. | 9–10 |