OCR A Level Economics: Scarcity, choice, the margin and the market economy (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 the area of study Scarcity and choice in Component 1, Microeconomics, of 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. All contexts and figures are invented.

Questions

1. Goods and wants.

(a) Distinguish between an economic good and a free good. [2] (b) Explain why a clinic run by the government and free to patients is still an economic good. [2] (c) Distinguish between a need and a want, using one example of each. [2]

2. Country B (illustrative) has the following statements made about it.

(a) Classify each as positive or normative: (i) output fell by 2% last year; (ii) the government should spend more on railways; (iii) a higher fuel tax will reduce petrol use; (iv) income differences are unfair. [4] (b) Explain why statement (iii) is positive even if it turns out to be wrong. [1]

3. A farm in Country C pays rent of £24,000, wages of £78,000 and interest of £12,000, and earns a profit of £36,000.

(a) Calculate wages as a percentage of the total reward to all four factors. [2] (b) Identify the factor that earns the £36,000 and explain its role. [2] (c) Identify the factor that earns rent. [1]

4. A printing firm’s total cost (TC) is £300 at 0 units, then £340, £375, £415 and £470 at 1, 2, 3 and 4 units.

(a) Calculate the marginal cost of each unit. [2] (b) The fixed cost rises by £100. State the new marginal cost of the third unit and explain. [2]

5. A firm sells at a price that falls as it sells more: £50, £46, £42, £38, £34 and £30 for 1 to 6 units. Marginal cost is a constant £22 and fixed cost is £40.

(a) Calculate total revenue and marginal revenue for each quantity. [2] (b) Find the profit-maximising quantity and explain using marginal values. [2] (c) Calculate the profit at that quantity. [2]

6. A consumer’s total utility from 1 to 6 slices of pizza is 40, 70, 90, 100, 104 and 104. One unit of utility is valued at £0.10 and a slice costs £1.50.

(a) Calculate the marginal utility of each slice. [2] (b) State how many slices a rational consumer buys and explain. [2] (c) Name the pattern shown by the marginal utility values. [1]

7. An aquifer in Country D holds 5,400 million cubic metres. It recharges by 120 million a year and 300 million a year are extracted.

(a) Calculate the net change in the stock each year. [1] (b) Calculate how many years until the aquifer is empty if nothing changes. [2] (c) Calculate the percentage cut in extraction needed to hold the stock level. [2] (d) Explain how depletion affects scarcity and choice. [2]

8. Explain the role of households, firms and the government in an economy. [6]

9. Evaluate the strengths and weaknesses of the market economy. [12]

10. Evaluate the role of government within the market economy. [10]

11. Evaluate the extent to which the marginal concept and the assumption of rationality help explain how economic agents behave. [10]

Answers

1. (a) An economic good uses scarce resources to supply [1]; a free good needs none and has no price [1]. (b) Staff, buildings and equipment are used [1]; taxpayers meet the cost even though patients do not pay [1]. (c) A need is required to survive, such as food [1]; a want is desired beyond that, such as a games console [1]. [6] Examiner insight: Part (b) gains credit when it names the resources used. “It is paid for by tax” alone does not show scarcity.

2. (a) (i) positive [1]; (ii) normative [1]; (iii) positive [1]; (iv) normative [1]. (b) It can be tested against evidence, so it can be true or false [1]. [5] Examiner insight: A “should” or “unfair” signals a value judgement. Answers lose credit by calling a statement normative because it seems untrue.

3. (a) Total reward = 24,000 + 78,000 + 12,000 + 36,000 = £150,000 [1]; 78,000 ÷ 150,000 × 100 = 52% [1]. (b) Enterprise [1]; it organises the other factors and bears the risk [1]. (c) Land [1]. [5] Examiner insight: Show the total before the division. A bare percentage gives nothing to credit if it is wrong.

4. (a) MC = change in TC for one more unit [1]: £40, £35, £40, £55 [1]. (b) £40 [1]; the extra £100 is added to every TC, so the differences are unchanged [1]. [4] Examiner insight: Mixing up total and marginal cost is the usual error. Say that the marginal value is a difference.

5. (a) TR = 50, 92, 126, 152, 170, 180 [1]; MR = 50, 42, 34, 26, 18, 10 [1]. (b) 4 units: the fourth has MR £26, above MC £22 [1]; the fifth has MR £18, below MC £22, so it loses profit [1]. (c) TC = 40 + 22 × 4 = £128 [1]; profit = 152 − 128 = £24 [1]. [6] Examiner insight: Justify the quantity with MR and MC for the units either side. Stating “MR = MC” with no figures is weaker.

6. (a) MU = change in total utility [1]: 40, 30, 20, 10, 4, 0 [1]. (b) Marginal benefit of the third is £2.00, above £1.50 [1]; the fourth is £1.00, below £1.50, so 3 slices [1]. (c) Diminishing marginal utility [1]. [5] Examiner insight: Convert utility to money before comparing it with the price. Comparing 20 utils with £1.50 mixes units.

7. (a) 120 − 300 = −180 million a year [1]. (b) 5,400 ÷ 180 [1] = 30 years [1]. (c) Extraction must fall to 120 [1]; (300 − 120) ÷ 300 × 100 = 60% [1]. (d) Water becomes scarcer for future users and costlier to obtain [1]; a choice must be made between current use and future supply, perhaps limiting uses or finding substitutes [1]. [7] Examiner insight: Part (d) gains credit when it links both scarcity and choice to the data, not when it lists general environmental harm.

8. Households supply factors, mainly labour [1], and buy goods and services with the income [1]. Firms combine factors to produce goods and services [1] and pay households for the factors [1]. Government provides goods and services, such as public services [1], and taxes, regulates and redistributes [1]. [6] Examiner insight: Each agent needs a role and a development. A list of agent names with no activity earns little.

9. Strength: prices signal changes in demand [1], so firms earn more by supplying what is wanted and resources move without planning [1]. Strength: profit and wages reward efficiency and effort, which drives innovation [1] and costs fall as firms compete [1]. Weakness: where costs fall on third parties, such as pollution, the market overproduces [1], so prices do not show the full cost [1]. Weakness: reward follows ownership and skill, so those with little are left with little [1], and inequality can persist [1]. Weakness: dominant firms restrict output and raise price [1], and markets can neglect long-run needs such as sustainability [1]. The judgement depends on how severe the failure is and how well the market works in the case [1]. Conclusion: the market is a strong way of allocating most goods, but needs correction where it fails, so a market with targeted intervention is better than either extreme [1]. [12] Examiner insight: Strong answers weigh the points against each other and reach a reasoned view. Two lists of bullet points leave the evaluation undone.

10. The government gives a legal framework and property rights, which markets need [1]. It corrects externalities with taxes, subsidies or regulation [1], moving output closer to the level society wants [1]. It redistributes income through tax and benefits [1] and promotes competition [1]. However, it lacks full information, so a tax may be set wrongly [1], and policies can have unintended effects or cost more than they gain (government failure) [1]. The balance depends on the size of the failure and the time lag [1]. Intervention is justified where a specific failure is large and the policy is targeted, but not where the cost of the policy exceeds the harm [2]. [10] Examiner insight: Name a failure and a matching policy, then weigh it against a limit on the policy. Treating intervention as automatically beneficial gains little.

11. The margin is the point of deciding on one more or one less unit [1]. A firm adds output while marginal revenue is at least marginal cost [1], and ignores fixed and sunk costs when it does [1]. Marginal values are hard to measure in practice [1], and some choices are all-or-nothing [1]. Rationality assumes agents maximise a goal with the information available [1]. It predicts firm decisions well when the goal is clear, as with profit [1], but households often lack information or follow habit [1]. Overall the concepts are most useful where choices can be varied by degrees and goals are clear, and weaker for one-off choices [2]. [10] Examiner insight: Strong answers link both concepts to a named agent and weigh the extent. Defining terms and stopping there leaves “extent” unanswered.

Where marks are usually lost

• Defining a free good as “free to the consumer” rather than needing no resources.
• Calling a statement normative because it is wrong, or positive because it has a number in it.
• Quoting a total or average where a marginal value is asked for.
• Not converting utility to money before comparing it with a price.
• Treating capital as money.
• Giving percentages without showing the total used.
• Listing strengths and weaknesses of the market with no weighing against each other.
• Treating government intervention as always beneficial, with no mention of government failure.

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 Scarcity and choice.