Economics · 2008 · November · Paper 3 · HL · Question paper

N08/3/ECONO/HP3/ENG/TZ0/XX+ ECONOMICS HIg HEr l Ev El PAPEr 3 Thursday 20 November 2008 (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 8808-5103 10 pages © International Baccalaureate Organization 2008 88085103 N08/3/ECONO/HP3/ENG/TZ0/XX+ 8808-5103 –  – 1. Study the extract below and answer the questions that follow. Luxpro sues Apple for $100 million  Taiwanese manufacturer Luxpro is suing Apple for $100 million after a court ruled that Luxpro could continue producing its MP3 music player that closely resembles Apple’s iPod shuffle. Luxpro first upset Apple back in March 2005 when it introduced its copy of the iPod shuffle. Apple claimed that the copy, known as Tangent, too closely resembled the iPod shuffle and so Apple believed it would unfairly lose abnormal profits if Luxpro’s Tangent MP3 player was allowed into the market.  In July 2005, a court in Taiwan accepted Apple’s case against Luxpro and forced Luxpro to stop manufacturing its Tangent MP3 players. But this week, an appeals court reversed that decision and now Luxpro wants $100 million as compensation for the losses it suffered when it was forced to stop production over the past 18 months. According to Luxpro, it lost valuable market opportunities and a substantial number of orders.  In its case against Apple, Luxpro claims Apple threatened retaliation against stores that carried the Tangent line. Those threats, according to Luxpro, included the removal of iPod products from any store that did not take Luxpro’s players off the shelves.  Luxpro maintains that its MP3 players are significantly different from the iPod shuffle. The company says its Luxpro logo is clearly displayed on the player and it has an organic light emitting diode (OLED) display that the iPod shuffle doesn’t have. This is clear evidence of product differentiation.  Although Apple enjoyed one of its best years on record in 2006, the computer and electronics maker started 2007 on difficult legal grounds. Aside from the Luxpro case,