Exam-style questions by topic — Edexcel A-Level Economics B
One verified question for each of 80 topics. These are written for this specification and checked by MasteryMind. They are not past-paper questions, and they are not from Pearson Edexcel.
The economic problem
In economics, what is meant by a 'trade-off' when making a choice?
Practise The economic problemBusiness objectives
Which of the following best defines the business objective of satisficing?
Practise Business objectivesStakeholders (economic agents) and their objectives
Which of the following scenarios best illustrates a direct conflict of interest between a firm's employees and its shareholders?
Practise Stakeholders (economic agents) and their objectivesRole of an entrepreneur in the economy
An entrepreneur organises factors of production to launch a highly successful streaming service for films and television. Over the next five years, several major high-street DVD rental chains go bankrupt. Which economic concept does this scenario best illustrate?
Practise Role of an entrepreneur in the economyEntrepreneurial motives
A founder establishes a bakery that exclusively sources Fairtrade ingredients and pledges to reinvest 50% of its surplus into local community projects. Which non-financial motive is most clearly demonstrated?
Practise Entrepreneurial motivesFactors of production
A successful retail chain decides to expand by opening a new branch. The founder delegates the daily management of the new branch to a hired store manager. How does the role of enterprise differ from labour in this specific context?
Practise Factors of productionSpecialisation
How might the division of labour ultimately create a significant financial disadvantage for an employer, despite initially increasing worker productivity?
Practise SpecialisationThe wider economic environment
The UK government announces a significant reduction in the rate of corporation tax, alongside a period of rising national unemployment. How are these combined macroeconomic changes most likely to affect a domestic discount supermarket chain?
Practise The wider economic environmentDemand
A manufacturer of a basic, unbranded food product, which is considered an inferior good, observes a leftward shift in its demand curve. Which combination of events would most likely cause this shift?
Practise DemandSupply
Which of the following best describes the primary objective of a firm aiming for profit maximisation?
Practise SupplyPrice determination
In the market for coffee beans, a severe drought destroys a large portion of the crop. Simultaneously, a new medical study is published that strongly links coffee consumption to improved longevity, significantly boosting consumer preference. What is the most likely combined effect on the equilibrium price and quantity of coffee beans?
Practise Price determinationPrice mechanism
A severe frost destroys a significant portion of a country's coffee crop, leading to a sharp increase in the price of coffee beans. Which function of the price mechanism is primarily responsible for reducing the quantity of coffee demanded by consumers in this scenario?
Practise Price mechanismThe competition
Why do established firms in a stable market face significant challenges if the market suddenly becomes dynamic due to a technological breakthrough?
Practise The competitionRole of banks in the economy
A commercial bank receives £50 million in new retail deposits. It decides to hold £5 million in reserve and lends the remaining £45 million to a local manufacturing firm to build a new factory. What is the direct economic function being performed by the bank in this scenario?
Practise Role of banks in the economyRisk and liability
What is the primary implication of a business owner having unlimited liability?
Practise Risk and liabilityMarket failure and externalities
A chemical factory produces plastic packaging. The factory pays £50,000 for raw materials and £30,000 for labour. The production process releases pollutants into a nearby river, causing £20,000 worth of damage to the local fishing industry. What is the total social cost of this production?
Practise Market failure and externalitiesGovernment intervention and failure
What is the fundamental economic purpose of government intervention in a market experiencing market failure?
Practise Government intervention and failureRevenue and costs
A firm's monthly production costs fall from £25,000 to £21,000. What is the percentage change in production costs?
Practise Revenue and costsThe relationship between revenue and costs
A manufacturing firm uses break-even analysis to plan its production for the year. However, to secure a large order from a new retailer, the firm must offer a 15% bulk discount. Why does this scenario highlight a limitation of the firm's original break-even analysis?
Practise The relationship between revenue and costsProfit and loss
In a highly competitive market, what is the primary function of supernormal profit?
Practise Profit and lossBusiness survival and cash flow
Which of the following best describes how a business uses a cash-flow forecast to identify its credit requirements?
Practise Business survival and cash flowGrowth
A supermarket chain acquires a smaller rival to increase its market share. How does this growth objective most likely increase the chain's market power over its suppliers?
Practise GrowthMethods of growth
A multinational food and beverage corporation decides to engage in conglomerate integration by acquiring a leading sportswear brand. Which of the following is the most likely strategic rationale for this decision?
Practise Methods of growthResearch and development (R&D) and innovation
How might a government use the tax system to encourage private sector firms to increase their expenditure on research and development (R&D)?
Practise Research and development (R&D) and innovationHow the digital economy affects markets and firms
How does the widespread use of social media and viral marketing by consumers most significantly alter the balance of power in digital markets?
Practise How the digital economy affects markets and firmsHow small firms compete
A small organic farm supplies specialist vegetables to high-end local restaurants. The farm works closely with the restaurant chefs to grow specific, unusual crop varieties that are not available from large wholesale distributors. Which of the following best evaluates how this strategy ensures the small farm's survival?
Practise How small firms competePrice elasticity of demand (PED)
A firm reduces the price of its product from £80 to £60. As a result, the quantity demanded increases from 1,000 units to 1,150 units. Calculate the price elasticity of demand (PED) using the original values to find the percentage changes.
Practise Price elasticity of demand (PED)Competing on price
Which pricing strategy involves setting a very low initial price for a new product in order to quickly gain market share and attract customers from competitors?
Practise Competing on priceIncome elasticity of demand (YED)
A firm manufactures luxury watches, which have an income elasticity of demand (YED) of +2.5. If the economy is forecast to experience a period of rapid economic growth, how should the firm use this YED information for its strategic planning?
Practise Income elasticity of demand (YED)Productivity
How does an increase in a country's relative productivity typically affect its international competitiveness?
Practise ProductivityCapacity utilisation
A factory has a maximum possible output of 100,000 units per month. In November, its current output was 80,000 units. What was the factory's capacity utilisation for November?
Practise Capacity utilisationEfficiency and competitiveness using lean production
What is the main objective of a Just in Time (JIT) stock management system?
Practise Efficiency and competitiveness using lean productionImpact on costs and sales revenue
A manufacturing firm implements lean production techniques to minimise the waste of resources. How might this strategy most likely affect the firm's financial performance?
Practise Impact on costs and sales revenueGlobalisation
Country X has experienced a 5% growth in its Gross Domestic Product (GDP) over the last decade. During the same period, the value of its international trade grew by 12%. Which characteristic of globalisation does this scenario best illustrate?
Practise GlobalisationDeveloped, emerging and developing economies
In an economy characterised by a high degree of income inequality, where a small percentage of the population earns a disproportionately large share of total income, how does the mean income typically compare to the median income?
Practise Developed, emerging and developing economiesInternational trade
Which of the following transactions represents an invisible export for the United Kingdom?
Practise International tradeExchange rates
Which of the following best describes an effective exchange rate index?
Practise Exchange ratesThe economic cycle
During a severe recession, an economy experiences a significant negative output gap. Which of the following is the most likely consequence for business investment and the price level?
Practise The economic cycleCircular flow of income, expenditure and output
Which of the following is classified as an injection into the circular flow of income?
Practise Circular flow of income, expenditure and outputInflation
How does a period of unexpectedly high inflation typically affect individuals who are borrowers and savers?
Practise InflationEmployment and unemployment
How might a high rate of unemployment in the local economy potentially benefit a growing manufacturing firm?
Practise Employment and unemploymentPossible macroeconomic objectives
How might achieving the objective of a low and stable rate of inflation conflict with other macroeconomic objectives in the short run?
Practise Possible macroeconomic objectivesPolicy instruments
A central bank raises the base interest rate to combat rising inflation. Which of the following best explains how this adjustment affects the components of aggregate demand?
Practise Policy instrumentsPotential policy conflicts and trade-offs
A government implements a significant increase in public sector spending to reduce the rate of unemployment. What is the most likely macroeconomic policy conflict that will arise from this action?
Practise Potential policy conflicts and trade-offsGrowing economies
What is the primary purpose of converting nominal economic values into real values?
Practise Growing economiesExchange rate changes
What is a key characteristic of the Eurozone regarding the exchange rates of its member countries?
Practise Exchange rate changesConditions that prompt trade
In the context of international trade, which of the following is classified as a 'push factor' for a business considering exporting?
Practise Conditions that prompt tradeAssessing the potential of different economies
Which of the following factors is most likely to be the primary consideration for a business deciding where to locate a new manufacturing production site?
Practise Assessing the potential of different economiesResponding to global demand
Which of the following is an example of a business adapting its non-price competition strategy for a global market?
Practise Responding to global demandDemand-side factors in global markets
A UK-based manufacturer of luxury vegan footwear decides to expand into the Asian market. The firm identifies that demand for its products is limited to high-income consumers in major cities. How should the firm adapt its marketing strategy to respond to these demand-side factors?
Practise Demand-side factors in global marketsThe impact of multinational corporations (MNCs)
A large multinational mining corporation opens a new extraction facility in a rural community. While the facility creates 500 new jobs, local agricultural firms report a significant decline in their crop yields. Which of the following best explains this impact on the local economy?
Practise The impact of multinational corporations (MNCs)Ethical issues
A multinational sportswear brand is found to be using suppliers that rely on child labour. What is the most likely direct consequence of this supply chain ethical failure for the brand?
Practise Ethical issuesControlling MNCs
Which of the following is a primary reason why a multinational corporation (MNC) might choose to implement strict self-regulation policies?
Practise Controlling MNCsEmployment patterns
Which scenario best illustrates a potential negative macroeconomic consequence for a developed economy resulting from the growth of the global labour force?
Practise Employment patternsMinimum wage legislation
How is a significant increase in the national minimum wage of a developed economy most likely to affect migration between economies, assuming other factors remain constant?
Practise Minimum wage legislationPoverty and inequality
What does a Gini coefficient of 0 represent in an economy?
Practise Poverty and inequalityReducing poverty
What is a primary characteristic of non-governmental organisations (NGOs) when providing international aid to developing countries?
Practise Reducing povertyThe impact of inequality on economic agents
A manufacturing firm operates in a region with widespread low income and high poverty rates. Which of the following is the most likely consequence for the firm's operations?
Practise The impact of inequality on economic agentsRe-distribution of income and wealth
Which of the following government policies is most likely to reduce the severity of the poverty trap and improve work incentives for low-income earners?
Practise Re-distribution of income and wealthSpectrum of competition
In the long run, how does a firm in monopolistic competition typically differ from a firm in perfect competition?
Practise Spectrum of competitionBarriers to entry
Which of the following characteristics is most likely to be found in a perfectly contestable market?
Practise Barriers to entryOligopoly
In which of the following market environments is a tacit agreement most likely to be successfully maintained?
Practise OligopolyBusiness objectives and pricing decisions
A firm has fixed costs of £250,000 per year. It sells its product for £50 per unit, and the average variable cost is £30 per unit. How many units must the firm sell to achieve a target profit of £150,000 for the year?
Practise Business objectives and pricing decisionsProductive and allocative efficiency
A monopoly manufacturer of electric vehicles operates at the lowest point on its long-run average cost curve. However, the price it charges is significantly higher than the marginal cost of producing the last vehicle. Which statement correctly evaluates the efficiency of this firm?
Practise Productive and allocative efficiencyMarket failure
Which of the following best describes a situation where monopsony power leads to market failure?
Practise Market failureBusiness regulation
A furniture retailer sells a sofa that collapses after two weeks of normal use. Under UK consumer protection regulations, what is the most likely legal right of the consumer in this situation?
Practise Business regulationArguments for and against regulation
How can the costs of regulation act as a barrier to entry in a highly regulated market, such as the pharmaceutical industry?
Practise Arguments for and against regulationMarket failure in society
A major car manufacturing plant in a northern town closes, resulting in high local unemployment. Despite job vacancies in the south, the unemployed workers do not relocate. Which of the following is the most likely cause of this geographical immobility?
Practise Market failure in societyExternalities
A chemical plant discharges untreated wastewater into a nearby river, reducing the fish population and reducing the income of local fishermen. How does this environmental externality affect the relationship between costs in the market?
Practise ExternalitiesPolicies to deal with market failure
A government is considering using either an indirect tax or an information campaign to reduce the consumption of a demerit good with highly inelastic demand. Why might the provision of information be a necessary complement to the indirect tax in this scenario?
Practise Policies to deal with market failureThe AD/AS model
An economy is experiencing a period of economic growth, but the government notices that the final impact of its recent infrastructure spending on national income is smaller than in previous years. Which of the following changes in the economy's marginal propensities would explain a decrease in the size of the multiplier effect?
Practise The AD/AS modelDemand-side policies
Which of the following is the most likely macroeconomic impact of a significant increase in aggregate demand (AD) when an economy is operating with substantial spare capacity?
Practise Demand-side policiesSupply-side policies
Which of the following is an example of an interventionist supply-side policy?
Practise Supply-side policiesThe impact of macroeconomic policies
Which of the following is a likely impact of an expansionary monetary policy on a country's economy?
Practise The impact of macroeconomic policiesRisks and uncertainty
In the context of business decision-making, which of the following best describes the fundamental difference between risk and uncertainty?
Practise Risks and uncertaintyThe role of the financial sector
Within the role of the financial sector, what is the primary purpose of assessing creditor risk?
Practise The role of the financial sectorThe role of the central bank
How does a decision by the Monetary Policy Committee to lower the official interest (base) rate typically influence macroeconomic activity?
Practise The role of the central bankThe Global Financial Crisis
Prior to the Global Financial Crisis, how did inadequate banking regulation contribute to the vulnerability of the financial system?
Practise The Global Financial CrisisAppendix 3: Quantitative skills
The price of Good X increases from £4.00 to £4.80. As a direct result, the weekly quantity demanded of Good Y increases from 2,000 units to 2,300 units. What is the cross elasticity of demand (XED) between these two goods, and what is their economic relationship?
Practise Appendix 3: Quantitative skillsAppendix 4: Accounting ratios
A company reports a profit for the year margin of 8% on revenue of £2,000,000. If its operating profit is £210,000 and taxation is £30,000, what is the value of its finance costs?
Practise Appendix 4: Accounting ratios
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