5 marks
Case study · Hand car wash (HCW) firms in the UK
Using the information provided, explain the market structure that best describes the hand car wash (HCW) industry in the UK.
Specification point 3.4.3 · Theme 3
Monopolistic competition
Market structures · Business behaviour and the labour market
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Focused calculations, explanations and diagrams
4 marks
ContextA luxury brownie baker is faced with falling demand as incomes fall.
Small local bakeries have many of the characteristics of monopolistic competition. Draw the short run profit maximising equilibrium of a loss-making luxury brownie baker.
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4 marks
ContextAccording to the Royal Mail, more hair and beauty salons opened on UK high streets last year than any other type of independent business, with a net increase of 10%, representing 626 new salons.
Draw a cost and revenue diagram to show the long-run equilibrium of a firm in monopolistic competition.
Diagram needed. Open the original question paper for the diagram
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Multiple-choice questions
Quick checks of economic understanding
A-level Paper 1, June 2025, Q3(a)Multiple choice
1 mark
ContextThe diagram shows the equilibrium position of a dental practice operating in a monopolistically competitive industry.
Which one of the following applies to the dental practice’s equilibrium at point E? The dental practice is:
Ain long-run equilibrium
Bmaking normal profit because average revenue is greater than average cost
Cmaking supernormal profit because marginal cost equals marginal revenue
Dproductively efficient
A-level Paper 1, June 2019, Q3(a)Multiple choice
1 mark
ContextAccording to the Royal Mail, more hair and beauty salons opened on UK high streets last year than any other type of independent business, with a net increase of 10%, representing 626 new salons.
The UK hair and beauty industry is an example of monopolistic competition because:
Afirms spend nothing on advertising and research
Bthe industry is dominated by a few large firms AR=D
Cthe products are homogenous
Dthere are low barriers to entry and exit Quantity
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