Pearson Edexcel International GCSE Economics: Business competition (4EC1) – 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 section 1.2.4 (Business competition) of the Pearson Edexcel International GCSE Economics (4EC1) specification, Issue 3, February 2026. There is a single tier of entry. All countries, firms and figures are invented. Read the study guide and the revision notes first. Course pages: Edexcel IGCSE Economics hub and printable checklist.

Questions

1. Define monopoly. [2]

2. State two barriers to entry that can protect a monopoly. [2]

3. Total sales in the market for school notebooks in Country D are 250,000 notebooks a month. Firm X sells 90,000 notebooks and Firm Y sells 40,000 notebooks.

(a) Calculate the market share of Firm X. [2] (b) Calculate the combined market share if Firm X takes over Firm Y. [2]

4. A workshop making wooden chairs in Country E produces 1,500 chairs a month at a total cost of 4,500. A large factory produces 15,000 chairs a month at a total cost of 30,000.

(a) Calculate the average cost per chair for the workshop and for the factory. [2] (b) Calculate the percentage fall in average cost from the workshop to the factory. [2] (c) Explain one reason why average cost falls as a firm grows. [2]

5. Four firms supply a market in Country F. Each has a unit cost of 14. Under normal rivalry the price is 20 and each firm sells 5,000 units. The firms then agree to form a cartel, fix the price at 25 and each sell 3,500 units.

(a) Calculate the profit of each firm under normal rivalry. [2] (b) Calculate the profit of each firm under the cartel. [2] (c) The cartel breaks down and a price war follows. The price falls to 17 and each firm sells 6,000 units. Calculate each firm’s profit. [2] (d) Calculate the percentage rise in price and the percentage fall in total sales caused by the cartel. [2]

6. Explain two reasons why a village florist might stay small. [4]

7. Explain two ways in which competition between firms can benefit consumers. [4]

8. A few large firms dominate the market for breakfast cereal. Explain two forms of non-price competition they might use. [4]

9. Three small bus companies on an island each charged a fare of 2.00. Together they carried 18,000 passengers a month. They merged into one company, which raised the fare to 2.60 and carried 15,000 passengers a month.

(a) Calculate the percentage change in the fare. [2] (b) Calculate the total revenue before and after the merger. [2] (c) Explain whether passengers are better off after the merger. [2]

10. A regional dairy, Firm M, plans to take over a smaller rival.

(a) Explain two reasons why Firm M might want to take over a competitor. [4] (b) Explain one way in which government regulation could limit the growth of Firm M. [2]

11. Evaluate the view that “a monopoly always harms consumers”. [9]

12. Three firms dominate a market and begin a price war. Evaluate whether this is good for consumers. [8]

Answers

1. A market in which one business dominates supply [1], with little or no competition, so that it has strong control over the market [1]. [2] Examiner insight: Say that the business dominates the market; “only one firm” alone leaves out the idea of market control that the second part of a definition needs.

2. Patents, which give the inventor sole rights for a set period [1]; high start-up costs, which few rivals can afford [1]. (Also accept legal barriers, high marketing budgets and technology.) [2] Examiner insight: Two distinct barriers are asked for, so naming the same idea twice in different words is unlikely to earn both credits.

3. (a) 90,000 / 250,000 x 100 [1] = 36% [1]. (b) (90,000 + 40,000) / 250,000 x 100 [1] = 52% [1]. [4] Examiner insight: Show the division before the answer; in part (b) add the two sales figures first, then divide by the whole market.

4. (a) Workshop: 4,500 / 1,500 = 3.00 [1]. Factory: 30,000 / 15,000 = 2.00 [1]. (b) (3.00 - 2.00) / 3.00 x 100 [1] = 33.3% [1]. (c) For example, the factory buys materials in bulk and gets a lower price per unit [1], which lowers the cost of each chair [1]. (Accept: specialised machinery or workers spread over more output.) [6] Examiner insight: Use the original cost, 3.00, as the base for the percentage, and for the explanation, link a cause to the lower cost per unit.

5. (a) (20 - 14) x 5,000 [1] = 30,000 each [1]. (b) (25 - 14) x 3,500 [1] = 38,500 each [1]. (c) (17 - 14) x 6,000 [1] = 18,000 each [1]. (d) Price: (25 - 20) / 20 x 100 = 25% rise [1]. Total sales: 20,000 falls to 14,000, which is 30% fall [1]. [8] Examiner insight: Profit is profit per unit multiplied by quantity, so show both stages; in part (d) multiply each firm’s sales by four before comparing the totals.

6. The village has few people, so the market is small [1][1] and demand cannot support a larger shop. The florist may serve a niche, such as handmade bouquets, where customers want a personal service [1][1] that would be lost if it grew. (Also accept: lack of finance for a bigger shop, or the owner preferring a manageable workload to maximum profit.) [4] Examiner insight: Each reason needs a link to the florist’s situation; “lack of money” with no explanation of what that prevents is likely to earn only part of the credit.

7. Lower prices, because rivals try to win customers by charging less [1][1]. Better quality, because firms improve products to keep customers [1][1]. (Also accept: more choice, and innovation as firms look for new products to get ahead.) [4] Examiner insight: Show a chain, such as rivalry leading to lower price, rather than stating the benefit alone.

8. Advertising, which builds awareness of a brand without a price cut [1][1]. Branding or packaging, which makes a product look different from similar cereals [1][1]. (Also accept: improved quality or new flavours, and loyalty schemes or free gifts that encourage repeat purchase.) [4] Examiner insight: A price cut or a discount is price competition, so avoid it here. Tie each form to the cereal market.

9. (a) (2.60 - 2.00) / 2.00 x 100 [1] = 30% rise [1]. (b) Before: 2.00 x 18,000 = 36,000 [1]. After: 2.60 x 15,000 = 39,000 [1]. (c) Passengers pay 30% more [1] and 3,000 fewer passengers travel, so they are probably worse off unless service has improved [1]. [6] Examiner insight: Revenue rising does not show that passengers gain; keep the firm’s and the passengers’ positions separate and give a judgement.

10. (a) It removes a rival, so the firm faces less competition [1] and has more control over price [1]. It adds customers, so sales and market share rise [1], and larger output may lower average cost through economies of scale [1]. (Also accept: spreading risk if the rival sells different products or in other areas.) (b) For example, a regulator could block the takeover [1] because it would give the dairy too much market power and could lead to higher prices [1]. (Accept: rules that add costs which are heavy for expansion.) [6] Examiner insight: In part (b) state what the regulation does and why, not just that “the government stops it”.

11. For (up to 4): a monopoly can use economies of scale to cut average cost [1], so it may be able to charge a lower price [1]; patents and profits can fund research and new products [1]; high profits may fund better quality [1]. Against (up to 4): as a price-maker with barriers to entry, it can raise price without losing customers [1]; there are few or no alternatives, so choice is limited [1]; with no rivals it has little reason to cut waste or improve quality [1]; it may keep scale savings as profit [1]. Judgement [1]: a supported conclusion, for example that “always” is too strong because consumers gain only if cost savings are passed on or a regulator limits price. [9] Examiner insight: The word “always” invites a judgement; a strong answer names the deciding factor and uses it to qualify the claim, rather than ending on a list.

12. For (up to 3): prices fall, so consumers can buy more for their money [1]; firms may also improve service to stand out [1]; consumers may switch to cheaper brands, getting immediate benefit [1]. Against (up to 3): profit falls, so firms may cut quality or research [1]; weaker firms may close, leaving fewer rivals [1]; with fewer rivals, the survivors may raise prices later, so the gain is short-lived [1]. Deciding factor and judgement: the effect depends on how long the war lasts and whether any firm leaves; a short war helps consumers, while a long one that ends in closures may leave them worse off [1], giving a clear conclusion [1]. [8] Examiner insight: Separate the short run from the longer run; an answer that stops at “lower prices” misses the effect on competition afterwards.

Where marks are usually lost

• Defining monopoly as “one firm” with no mention of dominance or control of the market.
• Naming a barrier to entry with no explanation of how it blocks newcomers.
• Forgetting to multiply profit per unit by the number of units sold.
• Dividing a change by the later value when the earlier value should be the base.
• Treating a cartel as a merger, or forgetting that members may cheat.
• Describing price cuts as non-price competition.
• Giving a reason why a firm stays small with no link to the firm described.
• Listing effects of a price war or monopoly with no judgement.

Next steps

• Revise with the revision notes.
• Reread the study guide.
• See the wider section in the competition, labour and government overview.
• Check progress on the printable checklist and the course hub.
• Try the free 10-minute diagnostics at /diagnostics/.
• Book a free trial class.

Official syllabus

Pearson Edexcel International GCSE Economics (4EC1) specification, Issue 3, February 2026, published by Pearson Education Limited, section 1.2.4.