Exam-style question
Try this first
Which response uses a proper economic chain of analysis for Perfect competition, imperfectly competitive markets and monopoly? Variation 3: Explain AQA section 3.1.5.9 Contestable and non-contestable markets.
- A.Use a three-step chain: cause changes incentives, incentives change demand or supply behaviour, and the new equilibrium affects welfare or resource allocation.
- B.Regulation is the same policy as a subsidy because both involve government.
- C.Government intervention always removes market failure with no trade-off.
- D.Give a definition of perfect competition only, without application, chain of analysis, evaluation or judgement.
Model answer
What a good answer should say
- 3.1.5.9 Contestable and Non-contestable Markets.
- MCQ 3: The correct answer is Use a three-step chain: cause changes incentives, incentives change demand or supply behaviour, and the new equilibrium affects welfare or resource allocation...
- This choice fits the microeconomic market analysis required by the learning objective.
Explanation
Why this works
is tested here through the prompt: "Which response uses a proper economic chain of analysis for Perfect competition, imperfectly competitive markets and". The correct option is "The correct answer is Use a three-step chain: cause changes incentives, incentives change demand or supply behaviour, and the new equilibrium affects welfare or resource allocation.." because it keeps the answer anchored to Contestable and Non-contestable Markets.
rather than a nearby misconception. The reasoning chain is: define the concept, apply it to Individuals, firms, markets and market failure, identify the economic mechanism, and check the consequence against consumer surplus, producer incentives, efficiency and equity.
A tempting distractor usually confuses a change in demand with quantity demanded, analysis with evaluation, or a short-run effect with a long-run judgement. For AQA Economics 7136, the best choice is the one that preserves the cause, transmission mechanism and consequence without adding an unsupported policy claim.
Common mistake
No common mistake is linked to this question yet.