Microeconomic Decision Makers · 2 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 4% of your exam marks.
New emphasis in the 2027 syllabus; the characteristics, advantages and disadvantages of competitive and monopoly markets are examined directly (diagrams are not required). Guidance based on specimen materials.
A is one in which many firms compete to sell a similar product, so no single firm can control the price. Each firm has to accept roughly the price set by the market as a whole.
| Feature | Effect in a competitive market |
|---|---|
| Price |
Discuss whether consumers benefit from more firms competing in a market
What comes up: an 8-mark "Discuss whether or not consumers would benefit from more firms competing in the [named] market."
Write (why they would benefit): more competition can raise quality; prices may be lower because consumers can switch between producers; there is more choice and greater variety, with products meeting different needs; consumers gain greater power to influence the market.
Write (why they might not benefit): some firms may be too small to gain economies of scale, so average costs and prices may be higher; fewer, larger firms might have more funds to invest in quality.
Watch out: both sides must be developed and a judgement reached; a one-sided answer is capped at Level 2 (maximum 5 marks). The economies-of-scale point is the key counter-argument the mark scheme rewards.
| Lower — firms compete on price, and consumers can switch to a cheaper rival, so prices are kept close to costs. |
| Quality | Higher — firms must keep improving to win customers from rivals. |
| Choice | Wider — many firms offer a range of products to suit different needs. |
| Profit | Lower per firm — competition limits how much each firm can charge above its costs. |