Economics · 2009 · November · Paper 3 · HL · Question paper

N09/3/ECONO/HP3/ENG/TZ0/XX ECONOMICS HIg HEr l Ev El PAPEr 3 Monday 9 November 2009 (morning) INSTRUCTIONS TO Ca Nd Ida TES  d o not open this examination paper until instructed to do so.  a nswer three questions.  Use fully labelled diagrams and references to the text / data where appropriate. 2 hours 8809-5103 11 pages © International Baccalaureate Organization 2009 8 8 0 9 5 1 0 3 N09/3/ECONO/HP3/ENG/TZ0/XX 8809-5103 –  – 1. Study the extract below and answer the questions that follow. Airlines and passengers urge commission to end BAA’s monopoly  Airlines and passenger groups have given BAA*, the world’s largest private airport company, a strong message by calling for the UK company’s break-up. As a result, the Competition Commission announced yesterday that it will investigate whether BAA’s monopoly of London’s airports is bad for passengers.  BAA claims that its ownership of the London airports of Heathrow, Gatwick and Stansted is good for passengers, because it allows BAA to achieve economies of scale and to use its profits to invest more efficiently. It argues that the criticisms and the investigation will result in delays to the investment that is needed to “improve the passenger experience and increase capacity”. BAA is set to double the price it charges airlines for each departing passenger so that it can increase its investment. However, airlines and passenger groups argue that BAA’s monopoly means that it may just increase profits instead of investing the profits in new facilities.  The Competition Commission has noted the criticisms of BAA’s operations, particularly at Heathrow, Gatwick and Stansted. These include delays, inadequate availability of facilities such as lifts (elevators) and escalators, overcrowding and concerns about cleanliness. Its investigation will look at how BAA’s monopoly position might affect incentives to improve services and whether it results in high levels of both allocative and productive inefficiency.  Some economists suggest that the Competition Commission should force the break-up of the monopoly, allowing the airports, or at least the terminals within the airports, to be run separately,