product differentiation: attacting customers by making a product apper different and superior to the competition's product.
include:
-location
-packaging
-service
-sponsorship
-competitions
-branding and logos
-advertising

Perfect competition : many small firm . none barriers to entry

Give one reason with an example to explain why this economy might be
operating at the point where 6 tonne of cabbages and 3 tonne of cauliflowers
are produced. 1 mark
Resources are not fully utilised, eg not all the land was planted.
Or
Bad season eg some of the crop was lost through lack of rain.


d) Describe the shape of the production possibility curve in Graph 1 and discuss
the significance of this for resource mobility. 1 mark
The PPC is a straight line – ½ mark
The same resources are used in the production of both cabbages and cauliflowers. That means the resources have perfect mobility and can be used equally well to produce either product. ½ mark


(a) Explain why Producer A does not supply any ice cream at a market price of $4 per kg. 1 mark
The firm will not produce when MC>MR ½ mark
Because if MC > MR, producing 1 more unit will add more to TC than to TR ½ mark
or
Profit maximisation occurs when MC=MR. ½ mark


) Explain why the demand for cigarettes is likely to be relatively price inelastic.
1 mark
Smoking cigarettes is addictive. People do not find it easy to reduce the quantity demanded when the price increases.

(b) On Graph 7 show the effect on the Labour Market in New Zealand if Fisher and
Paykel whiteware appliance manufacturer lost contracts to overseas
competitors. Fully explain the changes you make. (1 ½ marks)
½ mark DL1 or arrow showing a decrease in demand for labour
If Fisher and Paykel lost contracts to overseas competitors, it would have to reduce production. The demand for labour is a derived demand. The demand for resources depends on the demand for the product the resource is used to produce. Lost contracts mean fewer products are produced and therefore there will be a reduction in the demand for labour. (Good if students refer to the resource and emphasise the low cost environment of new locations). 1 mark


(a) State two characteristics of a firm in monopolistic competition. 2 marks
Differentiated product, many sellers, imperfect competitor, limited control over price, weak barriers to entry.

) Explain the relationship between Marginal Cost and the quantity of dresses produced by Mereana’s Kakahu Pai business. 1 mark
If Marginal Revenue is greater than Marginal Cost, the business will increase output to maximise profits where MR= MC. (½ mark)
If Marginal Revenue is less than Marginal Cost, the business will decrease output to maximise profits where MR=MC. (½ mark)


(a) how public ownership of the broadband network could correct the market failure.
If the broadband network was brought under state ownership, the government could produce QS to achieve allocative efficiency (1/2 mark)
and finance the subnormal profit from tax revenue (1/2 mark). 1 mark


(a) Traditionally kiwifruit farmers could be considered to be perfect competitors. Describe TWO characteristics of a perfectly competitive firm. 2 marks
(i)
Many sellers, homogeneous (identical) product, price taker, no barriers to entry (OR freedom of entry and exit), perfect knowledge, perfect mobility of resources.


(a) State two economic aims that the New Zealand government may have considered when it proposed to allocate funds to support the kiwifruit industry. 2 marks
Economic growth
Full employment
Balance of Payments equilibrium


(a) Branding kiwifruit as ZESPRI is a form of product differentiation. Define the term product differentiation and explain two other examples of product differentiation that could be used by the kiwifruit industry to compete in the export sector. 3 marks
Product differentiation is a way of attracting customers by making a product appear different and superior to the competition’s product. 1 mark for definition
Explain two other examples (NOT BRANDING). For example:
Packaging: The ZESPRI fruit can have a sticky label on each product and be displayed in eye catching trays. ½ for packaging ½ for explanation.
Advertising: New Zealand can exhibit at international trade fairs and provide samples to promote the product. ½ for advertising ½ for explanation.
Other examples could relate to competitions, service, sponsorship, service.


(a) What are two advantages of non-price competition? 2 marks
If successful, the firm will increase the demand for their product, increasing revenue and profits.
The firm can increase sales and market share without decreasing their prices.
Avoid price war.
Better quality products for consumers.


(a) What are two disadvantages of non-price competition? 2 marks
Non-price competition has a cost to the producer.
Products may be more expensive for the consumer.
2 marks for 2 correct points.