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A-Level Economics (Edexcel)

Micro and macroeconomics. Edexcel board.

Pass mark 24/40 60 minutes Edexcel How many can I get wrong?
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Q1. Which of the following best defines market failure?
  • A.  A situation in which the free market mechanism leads to an allocation of resources that is not Pareto efficient, causing a misallocation of resources
  • B.  A situation in which a firm makes an accounting loss over a full trading year
  • C.  A situation in which government intervention causes prices to rise above the equilibrium level
  • D.  A situation in which a market simply ceases to exist because no buyers or sellers remain
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✓ Answer: A. A situation in which the free market mechanism leads to an allocation of resources that is not Pareto efficient, causing a misallocation of resources
Market failure occurs when the price mechanism fails to allocate scarce resources efficiently, so that marginal social benefit does not equal marginal social cost. A firm making a loss is a normal business outcome, not market failure, and government intervention causing higher prices is a possible response to (not a definition of) market failure.
Q2. If demand for a good is price inelastic, a rise in price will cause total revenue to:
  • A.  Fall, because quantity demanded falls by more than price rises
  • B.  Rise, because quantity demanded falls by proportionally less than price rises
  • C.  Stay exactly the same
  • D.  Fall to zero immediately
Show answer & explanation
✓ Answer: B. Rise, because quantity demanded falls by proportionally less than price rises
With inelastic demand, the percentage fall in quantity demanded is smaller than the percentage rise in price, so total revenue (price times quantity) increases. This is why firms with inelastic demand curves, such as rail operators, can raise fares to boost revenue.
Q3. In the long run, firms in monopolistic competition earn only normal profit. Why does this occur despite each firm having some pricing power?
  • A.  Firms are legally required to charge a price equal to marginal cost
  • B.  There is a single dominant firm that sets the price for the whole industry
  • C.  Free entry allows new firms to enter when supernormal profits exist, shifting each existing firm's demand curve left until it is tangent to its average cost curve
  • D.  Average cost is always constant regardless of output
Show answer & explanation
✓ Answer: C. Free entry allows new firms to enter when supernormal profits exist, shifting each existing firm's demand curve left until it is tangent to its average cost curve
Supernormal profits attract new entrants offering similar differentiated products, which draws customers away from existing firms, shifting their demand curves leftward until AR is tangent to AC, leaving only normal profit. There is no legal requirement to price at marginal cost, and monopolistic competition by definition involves many firms, not one dominant firm.
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Markets & market failure · 35
Demand, supply & elasticity · 36
Costs, revenue & competition · 35
National income & AD/AS · 38
Macroeconomic policy · 38
International trade & development · 38
A-Level Economics (Edexcel) — common questions
Frequently asked
How many questions are in the A-Level Economics (Edexcel)?
The exam has 40 questions. Every Revision Robin mock uses the same 40-question format so your practice matches the real thing.
What is the pass mark for the A-Level Economics (Edexcel)?
You need 24 out of 40 correct to pass, which is about 60%. Our mocks mark you against this exact threshold.
How long do you get?
The test is timed at 60 minutes. Our full mock runs on the same clock so you can practise your pacing.
Are these the real exam questions?
No. Our questions are original and written to match the current syllabus, so they give realistic practice without copying the official paper. Every answer comes with a plain-English explanation. Always confirm current rules and content with Edexcel.