A-level · November 2021 · Paper 1

Markets and Business Behaviour

100 marks18 questions
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18 total
A-level Paper 1, November 2021, Q1(a)Multiple choice
1 mark
ContextStatement 1: Since Poland joined the European Union (EU) in 2004, over one million of its workforce have migrated to other countries in the EU. Statement 2: Many engineers have left Poland for higher paid jobs in other countries in the EU.

Which one of the following best describes the two statements above?

ANormative Normative
BNormative Positive
CPositive Normative
DPositive Positive

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1.1.2 · Positive and normative economic statements
Positive and normative economic statements revision notes
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A-level Paper 1, November 2021, Q1(b)Short answerExplain
4 marks
ContextStatement 1: Since Poland joined the European Union (EU) in 2004, over one million of its workforce have migrated to other countries in the EU. Statement 2: Many engineers have left Poland for higher paid jobs in other countries in the EU.

Explain the likely impact of migration on the wage level of engineers in Poland.

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3.5.2 · Supply of labour3.5.3 · Wage determination in competitive and non-competitive markets
Supply of labour revision notes Wage determination in competitive and non-competitive markets revision notes
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A-level Paper 1, November 2021, Q2(a)Short answerDraw
4 marks
ContextCobalt is a key metal used in the batteries of electric cars. China is the world’s largest producer of electric cars but has recently cut subsidies to its manufacturers. The Democratic Republic of the Congo (DRC) produces more than 60% of the world’s supply of cobalt, from its small-scale mines. Many new small mines opened in 2018 as a result of improved expectations of profit. The following graph shows the price of cobalt between June 2018 and June 2019. $ per pound 25 weight (454 grams) June 2018 June 2019 …

With reference to the information provided, draw a supply and demand diagram to show why the price of cobalt fell between June 2018 and June 2019.

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1.2.6 · Price determination
Price determination revision notes
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A-level Paper 1, November 2021, Q2(b)Multiple choice
1 mark
ContextCobalt is a key metal used in the batteries of electric cars. China is the world’s largest producer of electric cars but has recently cut subsidies to its manufacturers. The Democratic Republic of the Congo (DRC) produces more than 60% of the world’s supply of cobalt, from its small-scale mines. Many new small mines opened in 2018 as a result of improved expectations of profit. The following graph shows the price of cobalt between June 2018 and June 2019. $ per pound 25 weight (454 grams) June 2018 June 2019 …

Between June 2018 and June 2019 the price of cobalt fell by:

A25%
B37.5%
C62.5%
D166.7%

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1.2.6 · Price determination
Price determination revision notes
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A-level Paper 1, November 2021, Q3(a)Short answerComplete
4 marks
ContextRiver Island is a clothing retailer. Students are offered a River Island student discount code to benefit from a 10% price reduction as an attempt by the firm to increase profit.

Complete the third-degree price discrimination diagram below. Draw the impact on each sub-market by showing the price and profit.

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3.4.5 · Monopoly
Monopoly revision notes
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A-level Paper 1, November 2021, Q3(b)Multiple choice
1 mark
ContextRiver Island is a clothing retailer. Students are offered a River Island student discount code to benefit from a 10% price reduction as an attempt by the firm to increase profit.

Which one of the following is necessary for a firm to be able to practise price discrimination?

AIt has some degree of market power
BIt is able to store its product
CIts product has different features in different markets
DThe costs of supplying some customers are higher

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3.4.5 · Monopoly
Monopoly revision notes
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A-level Paper 1, November 2021, Q4(a)Short answerCalculate
2 marks
ContextPatrick Street Productions produces musicals. Its latest production is ‘It’s a Wonderful Life’ and the total cost of this production is $200 000. The ticket price is $40. The theatre has a capacity of 300 seats. The company aims for revenue maximisation. If this is achieved, revenue from ticket sales will cover 30% of total costs. Charitable donations contribute 12.5% towards total cost and a government subsidy ensures the production covers all of its costs.

Calculate the total revenue from ticket sales for ‘It’s a Wonderful Life’, assuming it is shown only five times, all at full capacity. You are advised to show your working.

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3.3.1 · Revenue
Revenue revision notes
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A-level Paper 1, November 2021, Q4(b)Short answerCalculate
2 marks
ContextPatrick Street Productions produces musicals. Its latest production is ‘It’s a Wonderful Life’ and the total cost of this production is $200 000. The ticket price is $40. The theatre has a capacity of 300 seats. The company aims for revenue maximisation. If this is achieved, revenue from ticket sales will cover 30% of total costs. Charitable donations contribute 12.5% towards total cost and a government subsidy ensures the production covers all of its costs.

Calculate the value of the government subsidy necessary for this production to cover all of its costs.

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3.3.2 · Costs1.4.1 · Government intervention in markets
Costs revision notes Government intervention in markets revision notes
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A-level Paper 1, November 2021, Q4(c)Multiple choice
1 mark
ContextPatrick Street Productions produces musicals. Its latest production is ‘It’s a Wonderful Life’ and the total cost of this production is $200 000. The ticket price is $40. The theatre has a capacity of 300 seats. The company aims for revenue maximisation. If this is achieved, revenue from ticket sales will cover 30% of total costs. Charitable donations contribute 12.5% towards total cost and a government subsidy ensures the production covers all of its costs.

Which one of the following conditions is necessary for revenue maximisation to occur?

AAverage revenue equals average cost
BAverage revenue equals marginal cost
CMarginal revenue equals average revenue
DMarginal revenue equals zero

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3.2.1 · Business objectives3.3.1 · Revenue
Business objectives revision notes Revenue revision notes
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A-level Paper 1, November 2021, Q5(a)Short answerDraw
4 marks
ContextIn Sicily, many households can grow lemons of the same quality as each other. Chiara decides to sell lemons at her local market, expecting to make a normal profit. She notices that all of the many lemon sellers are charging exactly the same price.

Draw diagrams showing the equilibrium positions for both the lemon market and a typical firm in the long run.

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3.4.2 · Perfect competition
Perfect competition revision notes
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A-level Paper 1, November 2021, Q5(b)Multiple choice
1 mark
ContextIn Sicily, many households can grow lemons of the same quality as each other. Chiara decides to sell lemons at her local market, expecting to make a normal profit. She notices that all of the many lemon sellers are charging exactly the same price.

Which one of the following will exist in the short run if Chiara makes a loss?

AAllocative efficiency and productive efficiency
BAllocative efficiency and productive inefficiency
CAllocative inefficiency and productive efficiency
DAllocative inefficiency and productive inefficiency

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3.4.2 · Perfect competition3.4.1 · Efficiency
Perfect competition revision notes Efficiency revision notes
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A-level Paper 1, November 2021, Q6(b)Data responseExamine
8 marks

Case study · The travel and tourism industry

Examine the likely impact of Thomas Cook’s plan ‘to reduce their airline emissions’ (Extract B, line 6) on the social optimum position. Use an appropriate externalities diagram in your answer.

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1.3.2 · Externalities
Externalities revision notes
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A-level Paper 1, November 2021, Q6(d)Data responseDiscuss
12 marks

Case study · The travel and tourism industry

With reference to Extract C, discuss the proposed government subsidy to prevent Thomas Cook from reaching its shut-down point.

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3.3.4 · Normal profits, supernormal profits and losses1.4.1 · Government intervention in markets
Normal profits, supernormal profits and losses revision notes Government intervention in markets revision notes
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A-level Paper 1, November 2021, Q6(e)Data responseDiscuss
15 marks

Case study · The travel and tourism industry

With reference to the information provided, discuss the decision by Jet2 to increase its package holiday prices.

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1.2.6 · Price determination1.2.3 · Price, income and cross elasticities of demand
Price determination revision notes Price, income and cross elasticities of demand revision notes
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A-level Paper 1, November 2021, Q7EssayEvaluate
Optional25 marks
ContextThe national living wage, the minimum wage for 25-year-olds and over, is expected to rise to more than £10.50 an hour in 2024 compared with £8.72 in 2020. The wage does not apply to the UK’s self-employed and ‘gig economy’ workers. Some economists said the increase was ambitious. Business groups warned that employers in sectors such as social care could be hit hard. In large parts of the north of England the living wage has already reached two-thirds of local median earnings, said Professor Shackleton.

Evaluate the disadvantages of a significant increase in the national living wage on a specific labour market, such as that for social care workers.

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3.5.3 · Wage determination in competitive and non-competitive markets
Wage determination in competitive and non-competitive markets revision notes
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A-level Paper 1, November 2021, Q8EssayEvaluate
Optional25 marks
ContextIn many industries, such as banking, health insurance, internet search engines, pharmaceuticals, social media and telecommunications, there have been increases in market concentration.

Evaluate the possible consequences for business decision making of increased market concentration. Refer to industries of your choice in your answer.

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3.4.4 · Oligopoly3.4.5 · Monopoly3.2.1 · Business objectives
Oligopoly revision notes Monopoly revision notes Business objectives revision notes
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