Edexcel A-level Economics
Theme 3 QUESTIONS WITH
ANSWERS.
Activity rate - CORRECT ANSWER✅✅the proportion of any given population actually
in the workforce
Allocative efficiency - CORRECT ANSWER✅✅where the goods produced satisfy
consumer preferences and maximise their welfare
Average cost - CORRECT ANSWER✅✅the average cost of production per unit //
AVC+AFC
Average fixed cost - CORRECT ANSWER✅✅TFC÷Q
Average product - CORRECT ANSWER✅✅the quantity of output per unit of factor
input // total product÷level of output
Average revenue - CORRECT ANSWER✅✅the average receipts per unit sold // TR÷Q
Average variable cost - CORRECT ANSWER✅✅TVC÷Q
Backwards vertical integration - CORRECT ANSWER✅✅a joining together into one
firm of two or more firms where the purchaser merges with/takes over one or more of its
suppliers
Barriers to entry - CORRECT ANSWER✅✅factors which make it difficult/impossible for
firms to enter an industry and compete with existing producers
Barriers to exit - CORRECT ANSWER✅✅factors which make it difficult/impossible for
firms to leave a market and cease production
Bilateral monopoly - CORRECT ANSWER✅✅when a single buyer faces a single seller
in a market
Brand - CORRECT ANSWER✅✅a name, design, symbol or other feature that
distinguishes a product from another and makes it non-homogenous
, Cartel - CORRECT ANSWER✅✅a formal agreement between firms to limit competition
in order to maximise profits
Collusion - CORRECT ANSWER✅✅collective agreements, be it tacit or formal,
between firms that restrict competition
collusive oligopoly - CORRECT ANSWER✅✅a market with a high concentration ratio
where a few interdependent firms cooperate (either formally or tacitly) to restrict
competition
Competitive tendering - CORRECT ANSWER✅✅introducing competition among
private sector firms which put in bids for work contracted out by public sector firms
Concentrated market - CORRECT ANSWER✅✅a market with a high concentration
ratio
Concentration ratio - CORRECT ANSWER✅✅the market share of the largest firms in
the industry
Conglomerate integration - CORRECT ANSWER✅✅a joining together into one firm of
two or more firms producing unrelated products
Consumer sovereignty - CORRECT ANSWER✅✅exists when the economic system
allocates resources totally according to consumer preference
Contestable market - CORRECT ANSWER✅✅a market with freedom of entry and
where the costs of exit are low
Contracting out - CORRECT ANSWER✅✅getting private sector firms to produce
goods and services then provided by the state
Cost-plus pricing - CORRECT 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
Creative destruction - CORRECT ANSWER✅✅where firms produce/create new
products that replace existing products on the market
Demerger - CORRECT ANSWER✅✅when a firm splits into two or more independent
businesses
Deregulation - CORRECT ANSWER✅✅the process of removing government controls
from markets
Theme 3 QUESTIONS WITH
ANSWERS.
Activity rate - CORRECT ANSWER✅✅the proportion of any given population actually
in the workforce
Allocative efficiency - CORRECT ANSWER✅✅where the goods produced satisfy
consumer preferences and maximise their welfare
Average cost - CORRECT ANSWER✅✅the average cost of production per unit //
AVC+AFC
Average fixed cost - CORRECT ANSWER✅✅TFC÷Q
Average product - CORRECT ANSWER✅✅the quantity of output per unit of factor
input // total product÷level of output
Average revenue - CORRECT ANSWER✅✅the average receipts per unit sold // TR÷Q
Average variable cost - CORRECT ANSWER✅✅TVC÷Q
Backwards vertical integration - CORRECT ANSWER✅✅a joining together into one
firm of two or more firms where the purchaser merges with/takes over one or more of its
suppliers
Barriers to entry - CORRECT ANSWER✅✅factors which make it difficult/impossible for
firms to enter an industry and compete with existing producers
Barriers to exit - CORRECT ANSWER✅✅factors which make it difficult/impossible for
firms to leave a market and cease production
Bilateral monopoly - CORRECT ANSWER✅✅when a single buyer faces a single seller
in a market
Brand - CORRECT ANSWER✅✅a name, design, symbol or other feature that
distinguishes a product from another and makes it non-homogenous
, Cartel - CORRECT ANSWER✅✅a formal agreement between firms to limit competition
in order to maximise profits
Collusion - CORRECT ANSWER✅✅collective agreements, be it tacit or formal,
between firms that restrict competition
collusive oligopoly - CORRECT ANSWER✅✅a market with a high concentration ratio
where a few interdependent firms cooperate (either formally or tacitly) to restrict
competition
Competitive tendering - CORRECT ANSWER✅✅introducing competition among
private sector firms which put in bids for work contracted out by public sector firms
Concentrated market - CORRECT ANSWER✅✅a market with a high concentration
ratio
Concentration ratio - CORRECT ANSWER✅✅the market share of the largest firms in
the industry
Conglomerate integration - CORRECT ANSWER✅✅a joining together into one firm of
two or more firms producing unrelated products
Consumer sovereignty - CORRECT ANSWER✅✅exists when the economic system
allocates resources totally according to consumer preference
Contestable market - CORRECT ANSWER✅✅a market with freedom of entry and
where the costs of exit are low
Contracting out - CORRECT ANSWER✅✅getting private sector firms to produce
goods and services then provided by the state
Cost-plus pricing - CORRECT 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
Creative destruction - CORRECT ANSWER✅✅where firms produce/create new
products that replace existing products on the market
Demerger - CORRECT ANSWER✅✅when a firm splits into two or more independent
businesses
Deregulation - CORRECT ANSWER✅✅the process of removing government controls
from markets
