A-level · November 2020 · Paper 1

Markets and Business Behaviour

100 marks19 questionsExam date 18 May 2020
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19 total
A-level Paper 1, November 2020, Q1(a)Short answerDraw
4 marks
ContextFuel duty is an excise tax imposed on the sale of petrol, included in the price paid by consumers, set at 58 pence per litre.

Draw a supply and demand diagram to show the incidence of a specific petrol tax on consumers and producers.

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1.2.9 · Indirect taxes and subsidies
Indirect taxes and subsidies revision notes
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A-level Paper 1, November 2020, Q1(b)Multiple choice
1 mark
ContextFuel duty is an excise tax imposed on the sale of petrol, included in the price paid by consumers, set at 58 pence per litre.

The indirect tax on fuel is increased in a market in which the price elasticity of demand is −0.1. Which one of the following is the most likely effect on consumer and producer surplus?

AConsumer surplus and producer surplus both decrease
BConsumer surplus and producer surplus both increase
CConsumer surplus decreases and producer surplus increases
DConsumer surplus increases and producer surplus decreases

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1.2.8 · Consumer and producer surplus1.2.9 · Indirect taxes and subsidies
Consumer and producer surplus revision notes Indirect taxes and subsidies revision notes
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A-level Paper 1, November 2020, Q2(a)Short answerDraw
4 marks
ContextThe external benefits of higher education include increased tax revenue, faster economic growth, greater innovation and labour market flexibility.

Draw an externalities diagram to show the likely impact of the consumption of higher education.

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1.3.2 · Externalities
Externalities revision notes
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A-level Paper 1, November 2020, Q2(b)Multiple choice
1 mark
ContextThe external benefits of higher education include increased tax revenue, faster economic growth, greater innovation and labour market flexibility.

On average, in the UK, a working-age graduate earns approximately £10 000 more per year than a non-graduate. This suggests a university degree provides a substantial

Aexternal benefit
Bexternal cost
Cprivate benefit
Dsocial cost

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1.3.2 · Externalities
Externalities revision notes
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A-level Paper 1, November 2020, Q3(a)Short answerExplain
4 marks
ContextThe EU tradable pollution permits scheme is expected to become more effective by 2020, due to recent reductions in the number of tradable pollution permits.

Explain one likely effect of reducing the number of tradable pollution permits.

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1.4.1 · Government intervention in markets
Government intervention in markets revision notes
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A-level Paper 1, November 2020, Q3(b)Multiple choice
1 mark
ContextThe EU tradable pollution permits scheme is expected to become more effective by 2020, due to recent reductions in the number of tradable pollution permits.

Regulation of firms that pollute is likely to be a problem because it

Aallows firms to use price signals
Bcreates unintended consequences
Cfills information gaps for businesses
Dmeans lower administrative costs

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1.4.2 · Government failure1.4.1 · Government intervention in markets
Government failure revision notes Government intervention in markets revision notes
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A-level Paper 1, November 2020, Q4(a)Short answerExplain
2 marks
ContextThe following illustrates the daily average cost curve for a doughnut producer: Costs (£) Average Cost 0 Z Output …

Explain what happens to total cost at output levels greater than Z.

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3.3.2 · Costs3.3.3 · Economies and diseconomies of scale
Costs revision notes Economies and diseconomies of scale revision notes
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A-level Paper 1, November 2020, Q4(b)Multiple choice
1 mark
ContextThe following illustrates the daily average cost curve for a doughnut producer: Costs (£) Average Cost 0 Z Output …

At output levels greater than Z, which one of the following correctly identifies what will happen to the cost?

AFalls Falls Rises
BFalls Rises Rises
CRises Rises Falls
DRises Rises Rises

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3.3.2 · Costs
Costs revision notes
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A-level Paper 1, November 2020, Q4(c)Short answerCalculate
2 marks
ContextThe following illustrates the daily average cost curve for a doughnut producer: Costs (£) Average Cost 0 Z Output …

For a luxury doughnut producer the average selling price is £2. The average variable cost is 40% of the selling price and its fixed cost per day is £300. Calculate total costs per day assuming it produces 400 doughnuts per day.

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3.3.2 · Costs
Costs revision notes
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A-level Paper 1, November 2020, Q5(a)Short answerExplain
2 marks
Context‘Bettys’ is a luxury café, first opened in Harrogate in 1919 specialising in afternoon tea service. Since then it has opened a further five branches in Yorkshire. It has no plans to increase the number of cafés. The six branches have 2 million customers a year.

Explain one likely reason why this business has remained small.

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3.1.1 · Sizes and types of firms
Sizes and types of firms revision notes
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A-level Paper 1, November 2020, Q5(b)Short answerExplain
2 marks
Context‘Bettys’ is a luxury café, first opened in Harrogate in 1919 specialising in afternoon tea service. Since then it has opened a further five branches in Yorkshire. It has no plans to increase the number of cafés. The six branches have 2 million customers a year.

Explain why the previous expansion of this business could be described as ‘organic growth’.

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3.1.2 · Business growth
Business growth revision notes
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A-level Paper 1, November 2020, Q5(c)Multiple choice
1 mark
Context‘Bettys’ is a luxury café, first opened in Harrogate in 1919 specialising in afternoon tea service. Since then it has opened a further five branches in Yorkshire. It has no plans to increase the number of cafés. The six branches have 2 million customers a year.

Assume ‘Bettys’ merges with a major tea leaf supplier. Which one of the following is most likely to be an advantage as a result of this merger?

AExternal economies of scale will increase efficiency
BGreater control to lower prices of tea
CIndustrial diversification increases risks
DLower monopoly power in the café market

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3.1.2 · Business growth3.3.3 · Economies and diseconomies of scale
Business growth revision notes Economies and diseconomies of scale revision notes
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A-level Paper 1, November 2020, Q6(a)Data responseExplain
5 marks

Case study · The UK Rail Industry

Refer to Figure 1. Explain the likely effect of the change in subsidy levels between 2017 and 2018 on rail fares. Include a supply and demand diagram in your answer.

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1.2.9 · Indirect taxes and subsidies1.2.6 · Price determination
Indirect taxes and subsidies revision notes Price determination revision notes
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A-level Paper 1, November 2020, Q6(c)Data responseAssess
10 marks

Case study · The UK Rail Industry

Assess whether complete nationalisation of the rail industry might protect employees.

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3.6.1 · Government intervention3.6.2 · The impact of government intervention
Government intervention revision notes The impact of government intervention revision notes
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A-level Paper 1, November 2020, Q7EssayEvaluate
Optional25 marks
ContextThe International Energy Agency has predicted that oil use by cars will peak in 2025 because of the increasing number of drivers switching to electric vehicles.

Evaluate the likely microeconomic consequences of consumers shifting from vehicles powered by fuel obtained from oil to electric-powered vehicles.

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1.2.6 · Price determination1.2.2 · Demand1.3.2 · Externalities3.5.1 · Demand for labour
Price determination revision notes Demand revision notes Externalities revision notes Demand for labour revision notes
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A-level Paper 1, November 2020, Q8EssayEvaluate
Optional25 marks
Context‘Amazon.com, the giant online retailer, has too much power.’ It uses its market power to put a squeeze on publishers, in effect driving down the prices it pays for books. If a publisher refuses, Amazon may take action by ‘delaying their delivery, raising their prices, and steering customers to other publishers’.

Evaluate the likely costs of a monopsony operating in a market such as book retailing.

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3.4.6 · Monopsony
Monopsony revision notes
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