A Level Paper 1, Oct 2020

Q1(a) Sketch demand and supply to illustrate how the burden of a per-litre petrol duty (58p) splits between buyers and sellers.

Q1(b) With fuel demand highly inelastic (PED −0.1), pick the likeliest outcome for consumer and producer surplus once the indirect tax rises.

Q2(a) Use an externalities diagram to illustrate the welfare effects of consuming higher education (context: spillovers in innovation, tax receipts, faster growth and a more flexible labour market).

Q2(b) Working-age graduates earn about £10 000 a year more than non-graduates; that gap chiefly signals which of these? (external benefit / external cost / private benefit / social cost)

Q3(a) Explain one consequence expected if fewer tradable pollution permits are issued under the EU scheme.

Q3(b) Identify the main drawback of regulating polluting firms (reliance on price signals / unintended consequences / closing information gaps / cheaper administration).

Q4(a) From the doughnut maker's daily average cost curve, explain how total cost behaves once output rises beyond Z.

Q4(b) Beyond output Z, state the direction taken by average fixed cost, by average variable cost and by marginal cost.

Q4(c) Given an average selling price of £2, average variable cost of 40% of the selling price and fixed costs of £300 per day, calculate total costs per day at an output of 400 doughnuts.

Q5(a) Give one explanation for Bettys staying small — a Yorkshire luxury café chain of six branches with no expansion planned.

Q5(b) Explain what makes the firm's earlier expansion count as organic growth rather than growth by acquisition.

Q5(c) Should the café merge with a large tea leaf supplier, identify the gain such backward vertical integration would most likely deliver.

Q6(a) Using Figure 1, explain how the 2017–2018 shift in subsidy would feed through to rail fares; a demand and supply diagram is needed.

Q6(b) Drawing on Figure 2, examine two influences that could have shaped rail travel demand in the years after 2008.

Q6(c) Assess how far taking the railways fully into public ownership would safeguard the workforce.

Q6(d) Using Extract A, discuss the case for treating the rail network as a natural monopoly.

Q6(e) Discuss what rail passengers stand to gain from price discrimination, with a diagram (context: adult fares versus Young Persons Railcard fares).

Q7 Evaluate the microeconomic fallout as drivers switch from petrol and diesel cars to electric ones, given a forecast peak in car oil use by 2025.

Q8 Evaluate the harm a monopsony buyer can inflict in markets such as book retailing, where Amazon is accused of squeezing publishers.