A-level · June 2022 · Paper 1

Markets and Business Behaviour

100 marks19 questions
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19 total
A-level Paper 1, June 2022, Q1(a)Multiple choice
1 mark
ContextDisney+ is a streaming service that distributes films and television series produced by the Walt Disney Studios. Disney+ subscribers (million) November 2019 10 December 2019 26.5 February 2020 28.6 April 2020 50 …

Ceteris paribus, the most likely consequence of the above data is that Disney+ will experience an increase in its:

Afixed costs
Bincome elasticity of demand
Cprice elasticity of demand
Drevenue

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1.2.2 · Demand3.3.1 · Revenue
Demand revision notes Revenue revision notes
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A-level Paper 1, June 2022, Q1(b)Short answerDraw
4 marks
ContextDisney+ is a streaming service that distributes films and television series produced by the Walt Disney Studios. Disney+ subscribers (million) November 2019 10 December 2019 26.5 February 2020 28.6 April 2020 50 …

Draw a supply and demand diagram to show the likely effect of the change in the number of subscribers on the market equilibrium for Disney+ services.

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1.2.6 · Price determination1.2.2 · Demand
Price determination revision notes Demand revision notes
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A-level Paper 1, June 2022, Q2(a)Short answerCalculate
2 marks
ContextThe table below shows data on the drinks market in Chile in 2017. Price elasticity of demand for sweetened drinks –1.37 Cross price elasticity of demand for bottled water +0.63 in response to a price change in sweetened drinks …

The price of sweetened drinks increases by 5%. Ceteris paribus, calculate the percentage change in the quantity demanded for sweetened drinks. You are advised to show your working.

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1.2.3 · Price, income and cross elasticities of demand
Price, income and cross elasticities of demand revision notes
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A-level Paper 1, June 2022, Q2(b)Short answerCalculate
2 marks
ContextThe table below shows data on the drinks market in Chile in 2017. Price elasticity of demand for sweetened drinks –1.37 Cross price elasticity of demand for bottled water +0.63 in response to a price change in sweetened drinks …

The price of sweetened drinks increases by 5%. Ceteris paribus, calculate the percentage change in the quantity demanded for bottled water. You are advised to show your working.

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1.2.3 · Price, income and cross elasticities of demand
Price, income and cross elasticities of demand revision notes
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A-level Paper 1, June 2022, Q2(c)Multiple choice
1 mark
ContextThe table below shows data on the drinks market in Chile in 2017. Price elasticity of demand for sweetened drinks –1.37 Cross price elasticity of demand for bottled water +0.63 in response to a price change in sweetened drinks …

Using the data on page 4, which one of the following is most likely?

ADecrease Complements
BDecrease Substitutes
CIncrease Complements
DIncrease Substitutes

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1.2.3 · Price, income and cross elasticities of demand
Price, income and cross elasticities of demand revision notes
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A-level Paper 1, June 2022, Q3(a)Short answerDraw
4 marks
ContextA company that provides drinking water and treats waste water has been fined £180000 after an incident that killed about 2 500 fish. The charges relate to an illegal discharge of sewage from the waste water treatment plant that polluted nine kilometres of the River Severn, a popular tourist destination.

Draw an externalities diagram to show the likely impact of the sewage discharge on the local tourist industry.

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1.3.2 · Externalities
Externalities revision notes
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A-level Paper 1, June 2022, Q3(b)Multiple choice
1 mark
ContextA company that provides drinking water and treats waste water has been fined £180000 after an incident that killed about 2 500 fish. The charges relate to an illegal discharge of sewage from the waste water treatment plant that polluted nine kilometres of the River Severn, a popular tourist destination.

Which one of the following is the most likely effect of the £180 000 fine?

Aincrease market failure
Bincrease profits for the water company
Creduce external costs
Dreduce government failure

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1.4.1 · Government intervention in markets1.3.2 · Externalities
Government intervention in markets revision notes Externalities revision notes
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A-level Paper 1, June 2022, Q4(a)Short answerDraw
4 marks
ContextPilgrim’s Pride is the second-largest chicken supplier in the US. It will pay a $107.9 million fine for price fixing with Tyson Foods and other chicken suppliers. The firms limited production to force prices higher and harm major customers, including KFC. Pilgrim’s Pride is thought to have gained at least $361 million in total revenue from the collusion.

Draw a simple two firm/two outcome game theory model to show why the chicken suppliers may have colluded.

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3.4.4 · Oligopoly
Oligopoly revision notes
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A-level Paper 1, June 2022, Q4(b)Multiple choice
1 mark
ContextPilgrim’s Pride is the second-largest chicken supplier in the US. It will pay a $107.9 million fine for price fixing with Tyson Foods and other chicken suppliers. The firms limited production to force prices higher and harm major customers, including KFC. Pilgrim’s Pride is thought to have gained at least $361 million in total revenue from the collusion.

Which one of the following is most closely associated with tacit collusion?

AOvert sharing of information
BPredatory pricing
CPrice wars
DUnspoken agreements

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3.4.4 · Oligopoly
Oligopoly revision notes
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A-level Paper 1, June 2022, Q5(a)Multiple choice
1 mark
ContextThe makers of Fiat cars merged with the makers of Vauxhall cars in 2021. Fiat management had aggressively sought a merger to achieve economies of scale. The competition authorities in the EU investigated the merger.

Which one of the following best describes the merger of the makers of Fiat cars and Vauxhall cars?

ABackward vertical integration
BForward vertical integration
CHorizontal integration
DOrganic growth

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3.1.2 · Business growth
Business growth revision notes
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A-level Paper 1, June 2022, Q5(b)Short answerExplain
2 marks
ContextThe makers of Fiat cars merged with the makers of Vauxhall cars in 2021. Fiat management had aggressively sought a merger to achieve economies of scale. The competition authorities in the EU investigated the merger.

Explain one type of internal economies of scale that the newly merged car company may achieve.

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3.3.3 · Economies and diseconomies of scale
Economies and diseconomies of scale revision notes
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A-level Paper 1, June 2022, Q5(c)Short answerExplain
2 marks
ContextThe makers of Fiat cars merged with the makers of Vauxhall cars in 2021. Fiat management had aggressively sought a merger to achieve economies of scale. The competition authorities in the EU investigated the merger.

Explain one likely concern the EU competition authorities may have had about the merger.

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3.6.1 · Government intervention3.1.2 · Business growth
Government intervention revision notes Business growth revision notes
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A-level Paper 1, June 2022, Q6(b)Data responseExamine
8 marks

Case study · UK branded coffee shop chains market

With reference to Figure 2 and your understanding of price elasticity, examine two factors that may cause significant changes in the international price of coffee beans.

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1.2.6 · Price determination1.2.5 · Elasticity of supply1.2.3 · Price, income and cross elasticities of demand
Price determination revision notes Elasticity of supply revision notes Price, income and cross elasticities of demand revision notes
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A-level Paper 1, June 2022, Q6(c)Data responseAssess
10 marks

Case study · UK branded coffee shop chains market

Profit maximisation is assumed to be the business objective of most firms. With reference to Extract A, assess whether this is the case for coffee shop owners.

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3.2.1 · Business objectives
Business objectives revision notes
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A-level Paper 1, June 2022, Q6(d)Data responseDiscuss
12 marks

Case study · UK branded coffee shop chains market

Using a cost and revenue diagram, discuss the likely impact of ‘rising costs’ for coffee shops on their profitability (Extract A, line 2).

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3.3.2 · Costs3.3.4 · Normal profits, supernormal profits and losses
Costs revision notes Normal profits, supernormal profits and losses revision notes
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A-level Paper 1, June 2022, Q7EssayEvaluate
Optional25 marks
ContextTesla held an 82% market share of the electric vehicle market in the United States during the first half of 2020.

Evaluate whether a monopoly is likely to operate efficiently. Refer to at least one monopoly of your choice.

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3.4.5 · Monopoly3.4.1 · Efficiency
Monopoly revision notes Efficiency revision notes
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A-level Paper 1, June 2022, Q8EssayEvaluate
Optional25 marks
ContextSome occupations in the UK are facing large labour shortages. Hard-to-fill vacancies include qualified chefs, software engineers, construction workers and qualified nurses.

Evaluate the factors that might influence the supply of labour in an occupation of your choice.

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3.5.2 · Supply of labour
Supply of labour revision notes
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