EdExcEl A-lEvEl Economics PAPEr 1 ExAm with
AccurAtE AnswErs & ExPlAnAtions | GuArAntEEd
PAss | lAtEst vErsion 2026
1. Economics - ANSWER The study of the allocation of scarce resources.
2. Economic Goods - ANSWER Resources that are scarce.
3. Short Run - ANSWER A time period where at least one factor of production
is fixed.
4. Long Run - ANSWER A time period where all factors of production are
variable.
5. Market structure - ANSWER the characteristics of a market that determine
the behaviour of firms in the market
6. Natural monopoly - ANSWER where economies of scale are so large
relative to market demand that the dominant producer will always enjoy
lower costs of production than any competitors
7. Non-homogenous goods - ANSWER goods that are similar but not identical,
for example through use of branding
8. Perfect information - ANSWER when all buyers are fully informed of all
prices and quantities for sale, whilst producers have equal information to
production techniques
,9. Product differentiation - ANSWER aspects of a good/service that distinguish
a product from its competition, for example through packaging or marketing
10.Sunk costs - ANSWER costs of production that are not recoverable if a firm
leaves an industry
11.Uncertainty - ANSWER a when one firm does not know how other firms
will react if it changes strategy
12.Perfect competition - ANSWER market structure where there are many
buyers and sellers, freedom of entry and exit, perfect knowledge and where
all firms produce a homogenous product
13.Price taker - ANSWER a firm with no control over market price and must
accept the market price if it wants to sell its product
14.Monopolistic competition - ANSWER a market structure where a large
number of small firms produce non-homogenous products and where there
are no barriers to entry
15.Monopolist - ANSWER a firm that controls all the output in a market
16.Monopoly - ANSWER a market structure where ine firm supplies all output
in the market without facing competition due to high barriers to entry
,17.Price discrimination - ANSWER charging different prices for the same
good/service in different markets
18.Monopoly power - ANSWER when firms are able to control the price they
charge for their product
19.Monopsony - ANSWER when there is only one buyer in a market
20.Contestable market - ANSWER a market with freedom of entry and where
the costs of exit are low
21.Hit and run competition - ANSWER when firms can enter a market at low
cost attracted by high profits and then leave at low cost when profits fall
22.Consumer sovereignty - ANSWER exists when the economic system
allocates resources totally according to consumer preference
23.Cost-plus pricing - ANSWER where firms fix a price for their products by
adding a fixed percentage profit margin on top of the long run average cost
of production
24.Profit maximisation - ANSWER when profit is at its highest // MR=MC
25.Profit satisficing - ANSWER making sufficient profit to satisfy the demands
of owners eg. shareholders
26.Revenue maximisation - ANSWER when revenue is at its highest // MR=0
, 27.Sales maximisation - ANSWER when the volume of sales is at its highest //
AR=AC
28.Allocative efficiency - ANSWER where the goods produced satisfy
consumer preferences and maximise their welfare
29.Dynamic efficiency - ANSWER where investment reduces the long run
average cost curve
30.Productive efficiency - ANSWER production at the lowest average cost
31.X-inefficiency - ANSWER inefficiency arising from a lack of competition
32.Creative destruction - ANSWER where firms produce/create new products
that replace existing products on the market
33.Multi-plant monopolist - ANSWER the sole producer in an industry has
multiple places of production which can be sold off to create competition
34.Competitive tendering - ANSWER introducing competition among private
sector firms which put in bids for work contracted out by public sector firms
35.Contracting out - ANSWER getting private sector firms to produce goods
and services then provided by the state
AccurAtE AnswErs & ExPlAnAtions | GuArAntEEd
PAss | lAtEst vErsion 2026
1. Economics - ANSWER The study of the allocation of scarce resources.
2. Economic Goods - ANSWER Resources that are scarce.
3. Short Run - ANSWER A time period where at least one factor of production
is fixed.
4. Long Run - ANSWER A time period where all factors of production are
variable.
5. Market structure - ANSWER the characteristics of a market that determine
the behaviour of firms in the market
6. Natural monopoly - ANSWER where economies of scale are so large
relative to market demand that the dominant producer will always enjoy
lower costs of production than any competitors
7. Non-homogenous goods - ANSWER goods that are similar but not identical,
for example through use of branding
8. Perfect information - ANSWER when all buyers are fully informed of all
prices and quantities for sale, whilst producers have equal information to
production techniques
,9. Product differentiation - ANSWER aspects of a good/service that distinguish
a product from its competition, for example through packaging or marketing
10.Sunk costs - ANSWER costs of production that are not recoverable if a firm
leaves an industry
11.Uncertainty - ANSWER a when one firm does not know how other firms
will react if it changes strategy
12.Perfect competition - ANSWER market structure where there are many
buyers and sellers, freedom of entry and exit, perfect knowledge and where
all firms produce a homogenous product
13.Price taker - ANSWER a firm with no control over market price and must
accept the market price if it wants to sell its product
14.Monopolistic competition - ANSWER a market structure where a large
number of small firms produce non-homogenous products and where there
are no barriers to entry
15.Monopolist - ANSWER a firm that controls all the output in a market
16.Monopoly - ANSWER a market structure where ine firm supplies all output
in the market without facing competition due to high barriers to entry
,17.Price discrimination - ANSWER charging different prices for the same
good/service in different markets
18.Monopoly power - ANSWER when firms are able to control the price they
charge for their product
19.Monopsony - ANSWER when there is only one buyer in a market
20.Contestable market - ANSWER a market with freedom of entry and where
the costs of exit are low
21.Hit and run competition - ANSWER when firms can enter a market at low
cost attracted by high profits and then leave at low cost when profits fall
22.Consumer sovereignty - ANSWER exists when the economic system
allocates resources totally according to consumer preference
23.Cost-plus pricing - ANSWER where firms fix a price for their products by
adding a fixed percentage profit margin on top of the long run average cost
of production
24.Profit maximisation - ANSWER when profit is at its highest // MR=MC
25.Profit satisficing - ANSWER making sufficient profit to satisfy the demands
of owners eg. shareholders
26.Revenue maximisation - ANSWER when revenue is at its highest // MR=0
, 27.Sales maximisation - ANSWER when the volume of sales is at its highest //
AR=AC
28.Allocative efficiency - ANSWER where the goods produced satisfy
consumer preferences and maximise their welfare
29.Dynamic efficiency - ANSWER where investment reduces the long run
average cost curve
30.Productive efficiency - ANSWER production at the lowest average cost
31.X-inefficiency - ANSWER inefficiency arising from a lack of competition
32.Creative destruction - ANSWER where firms produce/create new products
that replace existing products on the market
33.Multi-plant monopolist - ANSWER the sole producer in an industry has
multiple places of production which can be sold off to create competition
34.Competitive tendering - ANSWER introducing competition among private
sector firms which put in bids for work contracted out by public sector firms
35.Contracting out - ANSWER getting private sector firms to produce goods
and services then provided by the state
