AQA GCSE Economics: Market structures, monopoly and oligopoly (8136) – Practice Questions

These are original questions written for Marlbridge, for revision and practice on this content. They are not reproduced past-paper questions, and they do not replicate the exam’s exact structure, question count or mark tariffs – examination boards hold copyright in their own papers. Use these alongside the official past papers from your board or school.

These questions cover sections 3.1.5.1 to 3.1.5.3 of the AQA specification for GCSE Economics (8136), first taught from September 2017: market structures, competitive markets and non-competitive markets including monopoly and oligopoly. The specification has no tiers. All firms, places and figures are invented. For explanations see the study guide and revision notes, the AQA GCSE Economics hub and the checklist. To find gaps first, try the free diagnostics.

Questions

1. Identify three factors used to distinguish one market structure from another. [3]

2. Five firms supply tool hire in a town. Their market shares are: Ash 44%, Birch 23%, Cedar 18%, Dale 9% and Elm 6%.

(a) Calculate the combined market share of the two largest firms. [1] (b) Calculate the combined market share of the three largest firms. [1] (c) State what your answers suggest about the market. [1]

3. Explain two characteristics of a competitive market. [4]

4. Explain how competition between producers is likely to affect the price and choice available to consumers. [4]

5. A pizza stall in a competitive market sells 300 pizzas a week at £9.00 each. Its cost is £7.50 per pizza.

(a) Calculate its weekly profit and its profit margin (profit as a percentage of revenue) to one decimal place. [3] (b) Two new stalls open and the price falls to £8.40. Cost and sales stay the same. Calculate the percentage fall in weekly profit. [3]

6. Explain why profits are likely to be lower in a competitive market than in a market dominated by a small number of producers. [4]

7.

(a) What is meant by a monopoly? [2] (b) What is meant by an oligopoly? [2]

8. The only pharmacy in a village raises the price of a product from £12.00 to £15.00. Monthly sales fall from 800 to 760.

(a) Calculate the percentage rise in price. [2] (b) Calculate the change in monthly revenue. [3] (c) Explain what this shows about the firm’s market power. [1]

9. Explain two causes of monopolistic power. [6]

10. Two petrol stations, A and B, are the only sellers in an isolated town. Each chooses a high or a low price. The table shows monthly profit in £000 as (A, B).

	B high price	B low price
A high price	(30, 30)	(10, 50)
A low price	(50, 10)	(20, 20)

(a) State the total profit if both charge the high price. [1] (b) State the total profit if both charge the low price. [1] (c) Calculate A’s gain if it cuts its price while B holds its price. [1] (d) Explain why the firms may still avoid cutting their prices. [2]

11. A single large firm and several small firms supply bottled juice. The market price is £6.00 per case. The large firm makes 50,000 cases at a unit cost of £5.40. A small firm makes 5,000 cases at a unit cost of £7.00.

(a) Calculate the large firm’s profit and the small firm’s profit or loss. [3] (b) Explain how the difference in unit cost could help the large firm become dominant. [2] (c) Assess whether workers are likely to benefit if the large firm becomes the only supplier. [3]

Answers

1. Any three of: the number of producers [1]; the degree of product differentiation [1]; the ease of entry to the market [1]. [3] Examiner insight: A list of three distinct factors is enough here. Answers that give “price”, “size” and “profit” are describing outcomes rather than the factors named in the specification, and do not answer the question.

2. (a) 44 + 23 = 67% [1] (b) 44 + 23 + 18 = 85% [1] (c) A few firms hold most of the market, so it is concentrated or dominated by a small number of producers. [1] Examiner insight: Show the addition. A bare total shows nothing of your method, so write the addition. The comment must link the figures to concentration, not just repeat them.

3. First characteristic, such as many producers [1], with an explanation: no one firm is large enough to control the price, so each is a price taker in practice [1]. Second characteristic, such as easy entry and exit [1], with an explanation: new firms can join if profits are high, so existing firms cannot keep high profits for long [1]. [4] Examiner insight: Each characteristic needs its own development. Two bare statements, such as “many firms” and “easy entry”, usually earn only the identification points.

4. Firms compete for customers, so a firm that charges more than rivals loses sales [1]. This pushes prices down and keeps them close to costs [1]. Many firms offer many versions of the product, so consumers have wider choice [1]. Firms also improve quality and service to attract and keep customers, so consumers get better value [1]. [4] Examiner insight: Cover both price and choice. An answer that discusses only lower prices cannot reach full marks, and the explanation must say why competition has that effect.

5. (a) Profit per pizza = 9.00 − 7.50 = £1.50 [1]. Weekly profit = 1.50 × 300 = £450 [1]. Margin = 450 ÷ (9.00 × 300) × 100 = 450 ÷ 2,700 × 100 = 16.7% [1] [3] (b) New profit per pizza = 8.40 − 7.50 = £0.90, so weekly profit = 0.90 × 300 = £270 [1]. Fall = 450 − 270 = £180 [1]. Percentage fall = 180 ÷ 450 × 100 = 40% [1] [3] Examiner insight: Percentage change is measured against the original figure. Dividing by the new profit of £270 gives the wrong answer. Write the formula down before substituting.

6. In a competitive market firms cannot raise price without losing customers to rivals [1]. Prices are therefore close to costs, so profit per unit is small [1]. If profits are high, new firms enter easily, which raises supply and pushes the price down [1]. Where a few firms dominate, barriers to entry protect them, so they can keep prices and profits high [1]. [4] Examiner insight: The comparison matters. Describing why competitive profits are low earns less than an answer that also contrasts it with the protected position of the dominant firms.

7. (a) A monopoly is a market where there is a single producer [1] that supplies the whole market, so it has no direct rival and can influence price [1]. [2] (b) An oligopoly is a market where a few large producers share most of the sales [1] and each must consider how its rivals are likely to react [1]. [2] Examiner insight: “A big firm” is not a definition. The number of producers must appear in each answer. The second mark rewards a feature, such as having no rival or interdependence.

8. (a) Rise = 15.00 − 12.00 = £3.00 [1]. 3.00 ÷ 12.00 × 100 = 25% [1] [2] (b) Revenue before = 12.00 × 800 = £9,600 [1]. Revenue after = 15.00 × 760 = £11,400 [1]. Change = +£1,800 [1] [3] (c) Sales fell by only 5% (40 ÷ 800) after a 25% price rise, because customers have no alternative supplier, which shows the pharmacy has strong market power. [1] [1] Examiner insight: Give the sign and the unit of the change in revenue. The final point must refer to the evidence in your calculations rather than assert that the firm has power.

9. First cause, such as high barriers to entry or start-up costs [1]. Development: new firms cannot afford the equipment or premises needed, so few enter and the existing firm faces little competition [1]. Link to power: it can set higher prices without losing customers to new rivals [1]. Second cause, such as a patent or legal protection [1]. Development: the law gives one firm the sole right to sell the product for a period, so rivals cannot copy it [1]. Link to power: the firm becomes the only supplier and can influence price [1]. [6] Examiner insight: A cause alone earns little. A chain from cause to reduced competition to price-setting power is what separates full from partial answers. Choose two causes that are clearly different, not two kinds of cost.

10. (a) 30 + 30 = £60,000 [1] [1] (b) 20 + 20 = £40,000 [1] [1] (c) 50 − 30 = £20,000 [1] [1] (d) B is likely to respond by cutting its price too [1], so both end on 20 each, which is lower than the 30 each they earned before. Cutting leads to a price war that lowers total profit from 60 to 40 [1]. [2] Examiner insight: State units: the table is in thousands of pounds. For the explanation, name the rival’s likely reaction. This interdependence is what defines an oligopoly.

11. (a) Large firm: profit per case = 6.00 − 5.40 = £0.60, so 0.60 × 50,000 = £30,000 [1]. Small firm: loss per case = 6.00 − 7.00 = −£1.00 [1]. Loss = 1.00 × 5,000 = £5,000 [1] [3] (b) The large firm’s lower unit cost, from economies of scale, lets it sell at £6.00 and still profit [1]. The small firms make a loss at that price and may leave the market, leaving the large firm with a growing share [1]. [2] (c) Possible benefit: a dominant firm may offer secure jobs and training [1]. Possible harm: with only one employer and mergers cutting duplicated jobs, workers have fewer employers to choose between and less bargaining strength [1]. Judgement: it depends on how the firm behaves, but workers are more exposed if there is only one employer [1]. [3] Examiner insight: An “assess” question needs both sides and a judgement. Strong answers use the figures from the stem, such as the unit costs, rather than general statements. Check that your loss is shown as a loss, not a positive profit.

Where marks are usually lost

• Listing outcomes, such as high prices, when asked for the factors that distinguish structures.
• Calculating a percentage change with the new figure as the base.
• Leaving out units or the percentage sign in calculation answers.
• Defining monopoly or oligopoly without stating the number of producers.
• Stating a cause of market power without explaining how it reduces competition.
• Saying all large firms are monopolies.
• Writing about price only when a question asks about price and choice.
• Assessing with a one-sided answer and no judgement.

Next steps

• Read the revision notes and re-read the study guide for any question you missed.
• Visit the AQA GCSE Economics hub and tick off topics on the checklist.
• Take one of the free 10-minute diagnostics.
• Book a free trial class at /trial/.

Official syllabus

Source: AQA, GCSE Economics (8136) specification, for first teaching from September 2017, sections 3.1.5.1 to 3.1.5.3.