OCR A Level Economics: Resource allocation, economic systems and objectives (H460) – 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 Allocation of resources and The objectives of economic agents, in the area of study How competitive markets work, in the OCR A Level Economics (H460) specification, Version 3.0 (June 2026), for first assessment in 2021. Teaching is in the study guide and the revision notes. Course pages: the OCR Economics hub and the checklist. Check your level with the free 10-minute diagnostics. All contexts and figures are invented.

Questions

1. Explain what is meant by resource allocation. [3]

2. A rail operator in Country A (illustrative) raises the peak fare from £8.00 to £9.20 to encourage passengers to travel off-peak. Peak journeys are 20,000 a day. PED for peak travel is −0.4.

(a) Calculate the new number of peak journeys. [3] (b) Calculate the change in daily peak revenue. [2] (c) Explain why the incentive changes behaviour only a little. [2]

3. In Country G (illustrative) demand for flour is Qd = 900 − 30P and supply is Qs = 300 + 20P, with quantity in tonnes and price in £.

(a) Work out the equilibrium price and the equilibrium quantity. [2] (b) Planners fix the price at £9. Calculate the shortage. [2] (c) Explain how a market would remove the shortage. [2]

4. Explain how a market economy would respond to a rise in demand for electric bicycles. [4]

5. Country D (illustrative) has government spending of £306bn in a GDP of £600bn. Country E has £245bn in a GDP of £700bn.

(a) Calculate government spending as a percentage of GDP in each country. [2] (b) Explain why the figures alone do not show how resources are allocated in each. [2]

6. Evaluate whether a cash bonus is the most effective way for a firm to raise the output of its workers. [8]

7. A consumer has £12. Books cost £4 each and snacks cost £2 each. The marginal utility (MU) of each unit, in utils, is:

Unit	Books	Snacks
1st	40	18
2nd	32	14
3rd	24	10

(a) Calculate MU per £ for the first two units of each good. [1] (b) Find the combination that maximises utility. [3] (c) Calculate the total utility. [1] (d) Show that three books and no snacks give less utility. [1]

8. A firm in Country H (illustrative) faces the demand and cost figures below. Marginal cost is a constant £16 a unit.

Q	3	4	5	6	7	8	9	10
Price (£)	72	64	56	48	40	32	24	16
Total cost (£)	96	112	128	144	160	176	192	208

(a) Calculate marginal revenue for output of 4 to 8 units. [2] (b) State the output, price and profit when profit is at its greatest. [3] (c) Find the revenue-maximising output and the profit made. [2] (d) Find the output that maximises sales volume without making a loss. [2] (e) Suggest why a manager paid on sales may prefer this to the answer in (b). [1]

9. Evaluate whether a mixed economy allocates resources better than a purely market economy. [10]

10. Explain two possible objectives of a government and one conflict between them. [6]

11. Explain two problems a planned economy faces in allocating resources. [4]

12. Identify two possible objectives of a worker and two of a firm other than profit maximisation. [4]

Answers

1. Resource allocation is the way scarce resources are shared out [1] between competing uses [1]. It covers what is made, which methods are used and who receives the output [1]. [3] Examiner insight: A definition that mentions scarcity but not the choice between uses is only half an answer. Naming the questions it answers shows you understand the term.

2. (a) % change in price = (9.20 − 8.00) ÷ 8.00 × 100 = +15% [1]. % change in quantity = −0.4 × 15 = −6% [1]. New journeys = 20,000 × 0.94 = 18,800 [1]. [3] (b) Before: £8.00 × 20,000 = £160,000 [1]. After: £9.20 × 18,800 = £172,960, a rise of £12,960 [1]. [2] (c) Demand is inelastic, so quantity falls proportionately less than price rises [1]. Peak travellers have few substitutes, such as fixed work hours, so few change their time [1]. [2] Examiner insight: Show the percentage change in quantity before applying it. A final answer on its own gives a marker nothing to follow. In (c), tie the explanation to the elasticity figure given.

3. (a) 900 − 30P = 300 + 20P gives 600 = 50P, so P = £12 [1]. Q = 900 − 360 = 540 tonnes [1]. [2] (b) At £9, Qd = 900 − 270 = 630 and Qs = 300 + 180 = 480 [1]. Shortage = 630 − 480 = 150 tonnes [1]. [2] (c) Buyers compete, so the price rises [1]. The higher price and profit give firms an incentive to supply more, and some buyers drop out, until quantity demanded equals quantity supplied at £12 [1]. [2] Examiner insight: Substitute the price into both equations. Using only the demand equation gives the wrong gap. In (c), a chain of cause and effect, not just the word “equilibrium”, shows how the market works.

4. Demand rises, so the price of electric bicycles rises [1]. Higher price and profit signal that the good is wanted [1]. Firms produce more and bid for land, labour and capital, drawing them from other uses [1]. Resources are reallocated until the shortage ends and price settles [1]. [4] Examiner insight: A chain with each link explained gains more than a list of the words “signal” and “incentive”. Keep the example in view through the answer.

5. (a) Country D: 306 ÷ 600 × 100 = 51% [1]. Country E: 245 ÷ 700 × 100 = 35% [1]. [2] (b) Spending shows only how much the state spends, not who decides what is produced [1]. A country with a lower share could still regulate or direct much of its private sector, so the mix of ownership and control matters too [1]. [2] Examiner insight: Show the division. In (b), a developed point about control of resources earns more than saying “it depends”.

6. A bonus is a financial reward linked to output [1]. It raises the pay-off from extra effort, so workers produce more [1]. It works best where output is easy to measure and workers respond to money [1]. Other motives, such as job satisfaction, recognition or a sense of fairness, may matter as much [1]. Paying by output can push workers to cut quality or safety [1]. The bonus is a cost to the firm and must be less than the extra revenue [1]. The effect may fade over time as the bonus becomes expected [1]. Overall, a bonus is likely to be effective for measurable tasks, but combining it with non-financial rewards and quality checks is likely to work better [1]. [8] Examiner insight: For “evaluate”, set out reasons for and against, then reach a judgement that depends on the context. A one-sided list of what a bonus does leaves the question “most effective” unanswered.

7. (a) MU per £: books 10 and 8; snacks 9 and 7 [1]. [1] (b) Rank by MU per £: book 10, snack 9, book 8, snack 7 [1]. Spend: £4 + £2 + £4 + £2 = £12 [1]. Buy 2 books and 2 snacks [1]. [3] (c) 40 + 32 + 18 + 14 = 104 utils [1]. [1] (d) 40 + 32 + 24 = 96, which is below 104 [1]. [1] Examiner insight: Divide MU by price before comparing goods with different prices. Comparing raw MU figures picks the wrong good.

8. (a) TR = 256, 280, 288, 280, 256 for Q of 4 to 8 [1]. MR: 40 (4th), 24 (5th), 8 (6th), −8 (7th), −24 (8th) [1]. [2] (b) Produce while MR ≥ MC. The 5th unit has MR 24, above 16. The 6th has MR 8, below 16 [1]. Output is 5, and price is £56 [1]. Profit = 280 − 128 = £152 [1]. [3] (c) Revenue is highest at Q = 6, where TR is £288 (MR is still positive and then turns negative) [1]. Profit = 288 − 144 = £144 [1]. [2] (d) Profit at Q = 9 is 216 − 192 = £24 [1]. At Q = 10, profit is 160 − 208 = −£48, so volume is maximised at 9 units [1]. [2] (e) Pay or status may rise with sales, so the manager gains from more sales even though profit falls [1]. [1] Examiner insight: Use the rule that matches the objective: MR against MC for profit, MR above zero for revenue. State the output, the price and the profit separately when all three are asked.

9. A mixed economy combines the price mechanism with government action [1]. Markets send price signals and reward innovation and cost cutting [1]. They fail to provide public goods and ignore external costs [1]. The government can provide, tax, subsidise or regulate to correct these [1]. It can redistribute income to reduce inequality [1]. But governments can fail, with poor information, lobbying or high costs [1]. Government failure can leave resources worse allocated than the market did [1]. Higher taxes can also reduce incentives to work and invest [1]. The result depends on the quality of institutions and on how large and well-targeted the state role is [1]. Overall, a mixed economy is likely to allocate better where the market fails badly and the government is competent, while a minimal role suits well-functioning markets [1]. [10] Examiner insight: Use the context, such as the type of good, in the evaluation. The weaker answer lists market failure and stops, without weighing it against government failure.

10. One objective is economic growth [1]. It raises output and incomes, which can lift living standards [1]. A second is stable prices [1]. Low inflation protects the value of savings and aids planning [1]. A conflict is that fast growth can push up demand and inflation [1], so the government may have to slow growth to meet its price target [1]. [6] Examiner insight: Name the objectives, then say why each matters. The conflict must link the two chosen objectives, not some other pair.

11. Planners lack full information about what people want and about costs [1], so they may set targets that produce shortages and surpluses [1]. Without profit and prices, workers and managers have weaker incentives to work hard, cut costs or innovate [1], so output may be wasteful and of low quality [1]. [4] Examiner insight: Each problem should come with its consequence for allocation. A bare list of problems, with no result, earns less.

12. Worker: higher wages [1], job security or satisfaction [1]. Firm: sales revenue or volume maximisation, or growth [1], satisficing or social and ethical goals [1]. [4] Examiner insight: Pick objectives that differ from each other and from the one you were told to exclude. Repeating profit in other words gains nothing.

Where marks are usually lost

• Defining resource allocation without scarcity or the three questions.
• Quoting a quantity change without first working out the percentage change in price.
• Using only one of the two equations when finding a shortage.
• Comparing raw marginal utility figures when prices differ.
• Using the profit rule for a revenue or volume objective.
• Describing a planned economy as having no prices.
• Listing market and government failures with no weighing.
• Concluding without a judgement that depends on the context.

Next steps

• Re-read the study guide on any weak area.
• Use the revision notes for a final check.
• Visit the OCR Economics hub and the checklist.
• Take the free 10-minute diagnostics.
• Book a free trial class.

Official syllabus

OCR, A Level in Economics (H460) specification, Version 3.0 (June 2026), for first assessment in 2021, Component 1 content, area of study How competitive markets work.