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GCE JAN 2008 : (A2 1) Production and Competition

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ADVANCED General Certificate of Education 2008 Economics assessing Module 3: Production and Competition A2E11 Assessment Unit A2 1 [A2E11] TUESDAY 29 JANUARY, MORNING TIME 1 hour 20 minutes. INSTRUCTIONS TO CANDIDATES Write your Centre Number and Candidate Number on the Answer Booklet provided. Answer Question 1 and either Question 2 or Question 3. INFORMATION FOR CANDIDATES The total mark for this paper is 60. Quality of written communication will be assessed in parts (c), (d) and (e), of Question 1 and all parts of Question 2 or 3. Figures in brackets printed down the right-hand side of pages indicate the marks awarded to each question or part question. ADVICE TO CANDIDATES You are advised to take account of the marks for each part question in allocating the available examination time. A2E1W8 3848 A2E11M3Jan08t51314.indd 1 6/11/08 14:51:39 You must answer this question. 1 Study the information below and answer the questions which follow. Tabloid readership slumps British tabloid circulation and internet usage Circulation of red-top dailies*, m 6.5 Take-up of internet services, % of adults 70 6.0 60 5.5 50 5.0 40 4.5 30 2000 01 02 Sources: ABC; Ofcom 03 Tabloid circulation (left hand axis) 04 05 06 *Daily Mirror and Sun Internet usage (right hand axis) The Economist Newspaper Limited, London (2007) Figure 1 Newspaper sales are falling, but the drop is most marked for the mass circulation tabloid or red top papers such as the Sun. In the 12 months to January 2007 sales of the Sun fell by 3% and those of its smaller rival the Mirror declined by 6%. Media analyst, Paul Zwillenberg, estimates that tabloid sales have been falling at an average of 2.6% per year since 2000. 5 By contrast the quality end of the newspaper market has been faring relatively well. The Independent and the Daily Telegraph and most weekly news magazines are attracting more readers than they were half a decade ago. So why the difference? One factor is the ready availability of free news from a variety of sources such as television, the internet and free newspapers. Readers of the qualities want some analysis and explanation of events, something which they are unlikely to get from free sources and for which they are prepared to pay. The other selling points of the tabloids such as football results and celebrity scandal are also available from other sources, many of them free. Mobile phone messaging can provide sports scores almost instantaneously. The tabloids are beginning to look superfluous in an already over-crowded media market. Given that the tabloids retain a daily readership of almost five million, does an annual fall of almost 3% make that much difference to their profitability? The answer is definitely yes! The newspaper industry is characterised by high fixed or sunk costs and very low marginal costs. Indeed this is why most newspapers are distributed to shops on a sale or return basis. Falling sales can quite quickly turn profits into losses. 10 15 20 So what can the UK s downmarket tabloids do to hang on to their readers? Jim Chisholm of iMedia says they should stop patronising them. They ve been providing more and more sensational stories which readers enjoy on the day but turn them A2E1W8 3848 A2E11M3Jan08t51314.indd 2 2 6/11/08 14:51:40 off newspapers in the longer term. They should instead be delivering distinctive journalism on popular themes that readers cannot find elsewhere. This has helped to stem the flow of readers away from the quality papers and there is no reason why it should not work for the tabloids. (a) Using the information in Figure 1, describe the trends in internet usage and the circulation of UK tabloid papers from 2000 till 2006. 25 [5] (b) Explain why the information in Figure 1 does not necessarily prove that the internet and tabloid newspapers are substitutes. [4] (c) Explain why newspaper production has very high fixed costs and very low marginal costs. [6] (d) Explain why newspapers are usually distributed to shops on a sale or return basis . [6] (e) Critically examine some of the strategies which might be adopted by the proprietors of tabloid newspapers in order to arrest the decline in readership. [9] A2E1W8 3848 A2E11M3Jan08t51314.indd 3 3 [Turn over 6/11/08 14:51:40 Answer either Question 2 or Question 3. 2 (a) Explain what is meant by a contestable market. [6] (b) Contrast how contestable markets and perfectly competitive markets both prevent member firms from earning long run super-normal profits. (c) Evaluate the view that profit maximisation is not the goal of most firms. 3 [12] [12] (a) Explain the difference between internal economies and external economies. [6] (b) Show how internal economies and diseconomies of scale may determine the shape of a firm s long run average cost curve. [12] (c) Critically examine the view that improvements in transport and communication have significantly reduced the impact of external economies. [12] THIS IS THE END OF THE QUESTION PAPER Permission to reproduce all copyright material has been applied for. In some cases, efforts to contact copyright holders may have been unsuccessful and CCEA will be happy to rectify any omissions of acknowledgement in future if notified. A2E1W8 3848 A2E11M3Jan08t51314.indd 4 SP (NF/SLM) T51314/1 6/11/08 14:51:40

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Additional Info : Gce Economics January 2008 Assessment Unit A2 1Module 3: Production and Competition
Tags : General Certificate of Education, A Level and AS Level, uk, council for the curriculum examinations and assessment, gce exam papers, gce a level and as level exam papers , gce past questions and answer, gce past question papers, ccea gce past papers, gce ccea past papers

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