Edexcel Theme 3: Business Behaviour and the Labour Market — Past Paper Questions

Examine two factors which might influence the supply of labour in the electronics industry.

3.5.2 Supply of Labour

Assess whether firms in the electronics industry benefit from economies of scale.

3.3.3 Economies of Scale

Discuss the likely concerns of the competition authorities regarding the proposed merger of the two companies referred to in Extract C.

3.1.2 Business Growth · 3.6.1 Government Intervention

A small hotel in Scarborough has seen its energy bills increase from £2 000 to £8 000 per month. Small businesses do not have the energy management teams of larger companies to negotiate better deals. (Source adapted from: https://www.ft.com/content/d07797e7-2eb7-4240-b15d-692b39510def) Evaluate the microeconomic effects of rising energy bills on the hotel industry or an industry of your choice.

One of two options in Section C — candidates answered this or the other.

3.3.2 Costs · 3.3.4 Profits and Losses

Bytedance, which owns TikTok, has launched its own fragrance ‘Emotif’. The Beijing-based social media giant has already entered the food and drink markets. (Source adapted from: https://www.businessoffashion.com/news/china/tiktoks-parent-company-enters-chinas-perfume-market/) Evaluate the level of contestability in the fragrance industry or another industry of your choice.

One of two options in Section C — candidates answered this or the other.

3.4.7 Contestability

With reference to Figure 2 and Extract B, discuss the possible constraints on business growth for firms supplying energy to households in the UK.

3.1.2 Business Growth

Evaluate the microeconomic and macroeconomic factors that explain gender-based wage differences in the UK oil and gas industry.

One of two options in Section A — candidates answered this or the other.

3.5.3 Wage Determination

With reference to Figure 1, explain the market structure that best describes the market for UK online streaming services.

3.4.4 Oligopoly

Using examples from Figure 2 or Extract B, discuss the likely impact of price discrimination on a firm’s profits. Use a relevant diagram to support your answer.

3.4.5 Monopoly · 3.3.1 Revenue

The average UK household energy bill (gas and electric combined) rose 80% from £1 971 in 2021 to £3 549 in 2022. (Source adapted from: https://www.telegraph.co.uk/money/consumer-affairs/energy-price-cap-rise-october-2022-what-happen-household-bills/) Evaluate possible methods of government intervention to control household energy bills in the UK.

One of two options in Section C — candidates answered this or the other.

1.4.1 Government Intervention in Markets · 3.6.1 Government Intervention

Discuss the likely impact of a rise in gas prices on a firm that uses a large amount of gas in its production process. Use a cost and revenue diagram to support your answer.

3.3.2 Costs

Examine two reasons why retailers on the high street tend to remain small.

3.1.1 Sizes and Types of Firms

Discuss possible methods of price and non‑price competition that firms could use to increase the value of sales on the high street.

3.4.4 Oligopoly · 3.3.1 Revenue

Evaluate the microeconomic and macroeconomic effects of labour shortages in the UK, or a developed economy of your choice.

One of two options in Section B — candidates answered this or the other.

3.5.2 Supply of Labour · 2.1.3 Employment and Unemployment

With reference to Figure 1, calculate the three-firm concentration ratio for branded coffee shop chains.

3.4.4 Oligopoly

Profit maximisation is assumed to be the business objective of most firms. With reference to Extract A, assess whether this is the case for coffee shop owners.

3.2.1 Business Objectives

Using a cost and revenue diagram, discuss the likely impact of ‘rising costs’ for coffee shops on their profitability (Extract A, line 2).

3.3.2 Costs · 3.3.4 Profits and Losses

With reference to the information provided, discuss whether the coffee shop market is contestable.

3.4.7 Contestability

Tesla held an 82% market share of the electric vehicle market in the United States during the first half of 2020. (Source: adapted from https://electrek.co/2020/08/21/tesla-holds-us-ev-market-losing-federal-tax-credit/) Evaluate whether a monopoly is likely to operate efficiently. Refer to at least one monopoly of your choice.

One of two options in Section C — candidates answered this or the other.

3.4.5 Monopoly · 3.4.1 Efficiency

Some occupations in the UK are facing large labour shortages. Hard-to-fill vacancies include qualified chefs, software engineers, construction workers and qualified nurses. (Source: adapted from https://www.ft.com/content/36baacce-ddd0-11e8-9f04-38d397e6661c) Evaluate the factors that might influence the supply of labour in an occupation of your choice.

One of two options in Section C — candidates answered this or the other.

3.5.2 Supply of Labour

With reference to Extract C, discuss the likely effects of increasing integration within the food delivery market.

3.1.2 Business Growth

Evaluate the microeconomic and macroeconomic effects of significant increases in the minimum wage. Refer to restaurants or other food delivery services in your answer.

One of two options in Section A — candidates answered this or the other.

3.5.3 Wage Determination · 3.6.1 Government Intervention

Explain the likely impact of diminishing marginal productivity of labour on cabin crew staffing levels. Refer to Extract A in your answer.

3.5.1 Demand for Labour · 3.3.2 Costs

With reference to Extract C, assess whether Thomas Cook’s failure was caused by the principal-agent problem.

3.2.1 Business Objectives · 1.3.4 Information Gaps

With reference to Extract C, discuss the proposed government subsidy to prevent Thomas Cook from reaching its shut-down point.

3.3.4 Profits and Losses · 1.2.9 Indirect Taxes and Subsidies

With reference to the information provided, discuss the decision by Jet2 to increase its package holiday prices.

3.3.1 Revenue · 1.2.3 Elasticities of Demand

The national living wage, the minimum wage for 25-year-olds and over, is expected to rise to more than £10.50 an hour in 2024 compared with £8.72 in 2020. The wage does not apply to the UK’s self-employed and ‘gig economy’ workers. Some economists said the increase was ambitious. Business groups warned that employers in sectors such as social care could be hit hard. In large parts of the north of England the living wage has already reached two-thirds of local median earnings, said Professor Shackleton. (Source adapted from: https://www.theguardian.com/uk-news/2020/mar/11/budget-2020-national-living-wage-national-insurance) Evaluate the disadvantages of a significant increase in the national living wage on a specific labour market, such as that for social care workers.

One of two options in Section C — candidates answered this or the other.

3.5.3 Wage Determination · 3.6.1 Government Intervention

In many industries, such as banking, health insurance, internet search engines, pharmaceuticals, social media and telecommunications, there have been increases in market concentration. Evaluate the possible consequences for business decision making of increased market concentration. Refer to industries of your choice in your answer.

One of two options in Section C — candidates answered this or the other.

3.4.4 Oligopoly

Using the information provided, explain the market structure that best describes the hand car wash (HCW) industry in the UK.

3.4.3 Monopolistic Competition

Discuss the likely effects of changes in the level of migration on firms such as HCWs in the UK. Use a labour market diagram and the information provided to support your answer.

3.5.2 Supply of Labour

Evaluate the microeconomic and macroeconomic factors which determine the number of firms in an industry. Refer to HCWs or another industry of your choice.

One of two options in Section A — candidates answered this or the other.

3.4.7 Contestability · 3.1.1 Sizes and Types of Firms

Evaluate the microeconomic and macroeconomic effects of increased government intervention in an industry. Refer to HCWs or another industry of your choice.

One of two options in Section A — candidates answered this or the other.

3.6.1 Government Intervention

Discuss the likely impact of investment in new technology on the profitability of firms in Germany, as described in Extract C line 20. Use a cost and revenue diagram to support your answer.

2.2.3 Investment · 3.3.2 Costs

Assess whether complete nationalisation of the rail industry might protect employees.

3.6.1 Government Intervention

With reference to Extract A, paragraph 3, discuss whether the rail network can be considered to be a natural monopoly.

3.4.5 Monopoly

Discuss the likely benefits of price discrimination to rail passengers. Use a diagram to support your answer.

3.4.5 Monopoly · 3.3.1 Revenue

‘Amazon.com, the giant online retailer, has too much power.’ It uses its market power to put a squeeze on publishers, in effect driving down the prices it pays for books. If a publisher refuses, Amazon may take action by ‘delaying their delivery, raising their prices, and steering customers to other publishers’. (Source adapted from: https://www.nytimes.com) Evaluate the likely costs of a monopsony operating in a market such as book retailing.

One of two options in Section C — candidates answered this or the other.

3.4.6 Monopsony

Discuss factors that are causing many high street retailers in the UK to close some branches or shut down completely. Use a cost and revenue diagram to support your answer.

3.3.2 Costs · 3.3.4 Profits and Losses

Evaluate the microeconomic and macroeconomic effects of a decline in the literacy and numeracy skills of a country’s young workers.

One of two options in Section B — candidates answered this or the other.

2.6.3 Supply-Side Policies · 3.5.1 Demand for Labour

With reference to Extract B, examine the likely benefits to consumers of the integration between BT and EE.

3.1.2 Business Growth

Discuss one likely reason for the rise in BT’s profit (Figure 2, Extracts B and C). Use a cost and revenue diagram to support your answer.

3.3.4 Profits and Losses · 3.3.1 Revenue

Discuss methods of government intervention to protect consumers within the utilities markets, such as energy and telecommunications.

3.6.1 Government Intervention

In July 2017 it was announced that only a third of the BBC’s 96 top earning presenters were women and that its seven highest-paid presenters were all men. According to the High Pay Centre, in 2018, UK chief executives can earn 120 times more than the average full-time worker earning £28 758. With reference to an industry of your choice, evaluate why wage differences exist within the UK labour market.

One of two options in Section C — candidates answered this or the other.

3.5.3 Wage Determination

In October 2017 Scania, the Volkswagen-owned truck maker, was fined €880 million (£771 million) by the European Commission for colluding with five other truck manufacturers over a 14-year period. The firms had agreed to coordinate prices after experiencing additional costs of meeting emission regulations. With reference to an industry of your choice, evaluate why some firms engage in collusive behaviour.

One of two options in Section C — candidates answered this or the other.

3.4.4 Oligopoly

With reference to Figure 1 and Extract A, explain what is meant by a ‘highly concentrated’ market for potato crisps (Extract A, lines 2–3).

3.4.4 Oligopoly

In Extract A, lines 15–16, it was suggested that some firms may respond to the advertising ban by cutting the prices of their products. Using game theory and the information provided in Figure 1 and Extract A, discuss the effects on firms of cutting prices in an oligopolistic market.

3.4.4 Oligopoly

Examine two reasons, apart from access to finance, why 90% of the manufacturing sector in Mozambique ‘is made up of small enterprises’ (Extract E, line 9).

3.1.1 Sizes and Types of Firms · 4.3.2 Factors Influencing Growth

With reference to Extract A, discuss the likely effectiveness of ‘measures to open up and increase competition’ in the UK energy market.

3.6.1 Government Intervention · 3.4.7 Contestability

With reference to Extract B, assess how the regulation of energy suppliers’ profits is likely to affect consumers and suppliers in the energy market.

3.6.1 Government Intervention · 3.6.2 Impact of Intervention

With reference to Extract C and your own knowledge, discuss policies businesses and government might implement to reduce labour immobility to benefit the energy sector.

3.5.2 Supply of Labour

In July 2016 Apple’s share of the UK market for smartphones was 38%. Evaluate whether such a high market share for one company is in the consumer interest. Use appropriate diagrammatic analysis in your answer.

One of two options in Section C — candidates answered this or the other.

3.4.5 Monopoly · 3.4.1 Efficiency

With reference to Figure 1, briefly explain the market structure that best describes the UK branded coffee shop market.

3.4.3 Monopolistic Competition

With reference to Figure 3 and other information provided, discuss the price and non-price strategies that Starbucks may use to increase profitability.

3.4.4 Oligopoly · 3.3.1 Revenue

Evaluate the microeconomic and macroeconomic factors that may influence Starbucks’ decision whether to expand in a particular country.

One of two options in Section A — candidates answered this or the other.

3.1.2 Business Growth · 4.1.1 Globalisation

Examine the likely effects on the profitability of Indonesian rice farmers of the government’s increased investment in dams (Extract E, lines 43-48). Use a cost and revenue diagram to support your answer.

3.3.2 Costs · 4.3.3 Development Strategies

With reference to Figure 1 and Extract A, explain one likely reason for the change in the four-firm concentration ratio of the supermarket sector between 2010 and 2015.

3.4.4 Oligopoly

With reference to Figure 2 and Extract A, discuss the possible impact of supermarket monopsony power on both food suppliers and consumers.

3.4.6 Monopsony

Examine measures the government might use to restrict the monopsony power of supermarkets.

3.6.1 Government Intervention · 3.4.6 Monopsony

Discuss the likely problems for Sainsbury’s and Morrisons if the suggested merger between them goes ahead. Refer to Figure 1, Extract C and your own knowledge in your answer.

3.1.2 Business Growth · 3.3.3 Economies of Scale

‘Revenue maximisation is a more realistic business objective than profit maximisation for many businesses.’ To what extent do you agree with this statement? Refer to an industry of your choice in your answer.

One of two options in Section C — candidates answered this or the other.

3.2.1 Business Objectives

Discuss the likely impact of the National Living Wage on the profitability of firms. Use a cost and revenue diagram in your answer.

3.5.3 Wage Determination · 3.3.4 Profits and Losses