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EnglandEconomics

Theme 3: Business behaviour and the labour market

6 dot points across 6 inquiry questions. Click any dot point for a focused answer with worked past exam questions where available.

Why do some firms grow large while others stay small, and how do they expand?

The reasons firms grow or stay small, organic and inorganic growth, types of integration, the principal-agent problem and the divorce of ownership from control.
An Edexcel A-Level Economics A answer to business growth, covering why firms grow or remain small, organic versus inorganic growth, horizontal, vertical and conglomerate integration, demergers, and the principal-agent problem arising from the divorce of ownership and control.
10 min answer →

What goals do firms actually pursue, and is profit maximisation always the aim?

Profit maximisation and the MC equals MR rule, and alternative objectives including revenue maximisation, sales maximisation, satisficing and survival.
An Edexcel A-Level Economics A answer to business objectives, covering profit maximisation where marginal cost equals marginal revenue, and the alternative objectives of revenue maximisation, sales maximisation, satisficing, survival and ethical or social aims.
9 min answer →

How and why do governments regulate firms and protect competition?

Competition policy, regulation of monopolies and mergers, price and profit regulation of natural monopolies, protection of suppliers and employees, and the limits of intervention.
An Edexcel A-Level Economics A answer to government intervention to control firms, covering competition policy and the Competition and Markets Authority, the regulation of monopolies and mergers, price-capping and profit regulation of natural monopolies, protection of suppliers and employees, and the limits of regulation including regulatory capture.
10 min answer →

How does the number of firms in a market shape price, output and efficiency?

Perfect competition, monopolistic competition, oligopoly and monopoly, their assumptions and outcomes, price and non-price competition, and types of efficiency.
An Edexcel A-Level Economics A answer to market structures, covering perfect competition, monopolistic competition, oligopoly and monopoly, their assumptions and short-run and long-run outcomes, price and non-price competition, collusion, price discrimination, and allocative, productive, dynamic and X-efficiency.
13 min answer →

How do a firm's revenues, costs and profits behave as it changes output?

Total, average and marginal revenue and cost, the law of diminishing returns, economies and diseconomies of scale, and normal and supernormal profit.
An Edexcel A-Level Economics A answer to revenues, costs and profits, covering total, average and marginal revenue and cost, the law of diminishing marginal returns in the short run, internal and external economies and diseconomies of scale, and the difference between normal and supernormal profit.
12 min answer →

What determines wages and employment in a labour market?

The demand for and supply of labour, wage determination in competitive and imperfect markets, monopsony, trade unions, and the causes of wage differentials.
An Edexcel A-Level Economics A answer to the labour market, covering the derived demand for labour and marginal revenue product, the supply of labour, wage determination in perfectly competitive markets, monopsony employers, the effect of trade unions, and the causes of wage differentials and labour market failure.
11 min answer →