Monopolies restrict output to raise prices to exploit consumers. With the help of a diagram, assess the extent to which a government should intervene in monopoly markets.

Economics

IGCSE&ALevel

CAIE

Exam No：9708_s25_qp_42 Year：2025 Question No：2

Answer:

3.1.3 controlling prices in markets

3.2.4 maximum and minimum prices

7.5.10 calculation of supernormal and subnormal profit

7.5.9 definition of normal, subnormal and supernormal profit

7.6.1 perfect competition and imperfect competition: monopoly, monopolistic competition, oligopoly, natural monopoly

7.6.4.1 revenues and revenue curves

7.6.4.2 output in the short run and the long run

7.6.4.3 profits in the short run and the long run

7.6.4.4 shutdown price in the short run and the long run

7.6.4.5 derivation of a firm’s supply curve in a perfectly competitive market

7.6.4.6 efficiency and X-inefficiency in the short run and the long run

7.6.4.7 contestable markets: features and implications

7.6.4.8 price competition and non-price competition

7.6.4.9 collusion and the Prisoner’s Dilemma in oligopolistic markets, including a two-player pay-off matrix

8.1.2.1 government failure in microeconomic intervention

8.1.2.2 definition of government failure

8.1.2.3 causes of government failure

8.1.2.4 consequences of government failure

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