Exam-style question
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Subsidy design on 3.1.4.1 Production and productivity: which option best explains the economic mechanism in Individuals, firms, markets and market failure?.
- A.Define production costs and revenue, apply it to the market context, explain the cause, transmission mechanism and effect, then judge why the result depends on context.
- B.Government intervention always removes market failure with no trade-off.
- C.A tax shifts demand rather than affecting supply incentives and costs.
- D.Give a definition of production costs and revenue only, without application, chain of analysis, evaluation or judgement.
Model answer
What a good answer should say
- Correct answer: Define production costs and revenue, apply it to the market context, explain the cause, transmission mechanism and effect, then judge why the result depends on context..
- It is correct because it links 3.1.4.1 production and productivity to policy intervention and keeps the reasoning within the evidence supplied by the question.
Explanation
Why this works
The reasoning should move from cause to transmission mechanism to consequence. Use a diagram, calculation or data point if it is relevant, then test the answer with Economics evaluation: size of effect, time period, elasticity or responsiveness, assumptions, and distribution of gains and losses.
This keeps the response specific to Production, costs and revenue rather than repeating a generic question template.
Common mistake
No common mistake is linked to this question yet.