Markets and Market Failure · 7136/1
AQA A-level Paper 1, June 2025
All 14 written questions from AQA A-level Paper 1 (June 2025), Markets and Market Failure. Case studies: The international rice market and The UK water industry. Each question shows its marks and topic, with an examiner insight on 10, and opens the question paper and mark scheme at the right page.
Context 1
The international rice market
Extracts: A ban on Indian rice exports · What options do rice-importing nations have?
Q1
Using the data in Extract A (Figure 1), calculate the difference between India’s share of world exports of rice in 2010 and 2022.
Give your answer to one decimal place.
Give your answer to one decimal place.
TopicPrice determination in a competitive marketCommodity markets
Q2
Explain how the data in Extract A (Figure 1 and Figure 2) show that the rice export ban by India in 2022 is likely to have had a significant impact on the world price of rice.
TopicPrice determination in a competitive marketCommodity marketsDemand & supplyGovernment intervention (micro)
Q3
Extract B (line 19) states: ‘In Nigeria, the demand for rice is very price inelastic’.
With the help of a diagram, explain how the Indian export ban is likely to have affected the market for rice in Nigeria.
With the help of a diagram, explain how the Indian export ban is likely to have affected the market for rice in Nigeria.
TopicPrice determination in a competitive marketPrice elasticity of demandDemand & supplyCommodity markets
Examiner insight
- What to cover
- India's export ban reduces world supply. Nigeria's demand is price inelastic, so the price rises sharply and quantity falls only slightly.
- Diagram
- Supply shifting left with inelastic demand.
- Watch out
- Stress the size of the price rise and use the extract.
Q4
Extract C (lines 6–7) states: ‘An alternative would be to impose a maximum price for consumers, as both Sri Lanka and the Philippines have done’.
Using the data and your knowledge of economics, evaluate the view that imposing a maximum price for rice is the best way for a rice-importing nation, such as Nigeria, to ensure the affordability of a basic food for its citizens.
Using the data and your knowledge of economics, evaluate the view that imposing a maximum price for rice is the best way for a rice-importing nation, such as Nigeria, to ensure the affordability of a basic food for its citizens.
TopicMarket failure and government interventionPrice controls
Examiner insight
- What to cover
- A maximum price keeps rice affordable for consumers.
- Diagram
- Maximum price diagram showing a shortage.
- Evaluation
- It can cause shortages, black markets and lower domestic supply. Compare with subsidies, stock release, and trade deals. Judge by elasticity and time.
- Watch out
- Use the data on Nigeria and other countries.
Context 2
The UK water industry
Extracts: England’s privatised water companies run into trouble · What next for the water industry?
Q5
Using the data in Extract D (Figure 3), calculate the median number of storm overflow hours by water company in 2022.
TopicMarket failure and government interventionExternalities
Q6
Explain how the data in Extract D (Figure 4) show that household water bills have increased in real terms since privatisation in 1989.
TopicMarket structuresCompetition policy & regulation
Q7
Extract E (line 10) states: ‘The minimum efficient scale in the water industry is large’.
With the help of a diagram, explain why the large minimum efficient scale in the water industry is likely to lead to the market being supplied by a few large firms with monopoly power.
With the help of a diagram, explain why the large minimum efficient scale in the water industry is likely to lead to the market being supplied by a few large firms with monopoly power.
TopicProduction, costs and revenueCosts & economies of scaleMonopoly & market power
Examiner insight
- What to cover
- A large minimum efficient scale means only a few firms can produce at the lowest cost. If MES is large relative to market demand, the market supports only a few large firms or a monopoly.
- Diagram
- LRAC with MES shown against market demand.
- Watch out
- Show MES on the diagram and link it to market structure.
Q8
Extract F (lines 5–6) states: ‘if regulators impose fines, these costs may be passed on to consumers or reduce investment’.
Using the data in the extracts and your knowledge of economics, assess the view that stronger regulation would be a better policy than bringing the water industry back into public ownership.
Using the data in the extracts and your knowledge of economics, assess the view that stronger regulation would be a better policy than bringing the water industry back into public ownership.
TopicMarket structuresCompetition policy & regulation
Examiner insight
- What to cover
- Stronger regulation: price caps, investment targets, fines.
- Evaluation
- Public ownership: long-term investment, no dividends, but cost and government failure. Judge by investment needs and the extract data on bills and pollution.
- Watch out
- Use the data in the extracts.
Q9Essay 1
Explain, with examples, the differences between a private good, a public good and a quasi-public good.
Essay stimulus. Broadcasting used to be considered a public good, but the growth of on-demand television streaming services suggests that this is no longer the case. In 2023, 68% of UK consumers were subscribing to one or more oligopolistic providers of on-demand television streaming services.
TopicMarket failure and government interventionPublic goods
Examiner insight
- What to cover
- Private goods are rival and excludable. Public goods are non-rival and non-excludable, so the free-rider problem stops private supply. Quasi-public goods have some public good features, such as roads.
- Watch out
- Use clear examples for each type.
Q10Essay 1
Evaluate the view that oligopolies serve society well.
Essay stimulus. Broadcasting used to be considered a public good, but the growth of on-demand television streaming services suggests that this is no longer the case. In 2023, 68% of UK consumers were subscribing to one or more oligopolistic providers of on-demand television streaming services.
TopicMarket structuresOligopoly
Examiner insight
- What to cover
- Oligopolies can gain economies of scale, fund research and offer choice through non-price competition.
- Diagram
- Kinked demand curve.
- Evaluation
- They can also collude, raise prices and restrict output. Judge by market and regulation.
- Watch out
- Use named examples.
Q11Essay 2
Explain how technological progress can affect productivity, efficiency and firms’ costs of production.
Essay stimulus. In 2023, the UK government pledged to invest £960 million in green technologies, such as renewable energy schemes. The aim is to help reduce the cost of green technologies for businesses and to encourage their adoption by firms. Environmental groups suggest that currently only a small proportion of UK firms take environmental objectives seriously, preferring instead to focus on profit.
TopicProduction, costs and revenueProductivity & efficiencyTechnological change
Examiner insight
- What to cover
- Technological progress raises productivity, which lowers unit costs and can shift LRAC down. It can improve productive and dynamic efficiency.
- Diagram
- LRAC shifting down.
- Watch out
- Cover productivity, efficiency and costs, as the question asks.
Q12Essay 2
Assess the view that the main objective of firms is to maximise profits.
Essay stimulus. In 2023, the UK government pledged to invest £960 million in green technologies, such as renewable energy schemes. The aim is to help reduce the cost of green technologies for businesses and to encourage their adoption by firms. Environmental groups suggest that currently only a small proportion of UK firms take environmental objectives seriously, preferring instead to focus on profit.
TopicMarket structuresBusiness objectives & growthRevenue & profit
Examiner insight
- What to cover
- Profit maximisation is common, but firms also have other goals.
- Diagram
- Profit and revenue maximisation diagram.
- Evaluation
- Other objectives: survival, growth, satisficing, social and environmental aims. Judge by firm size and ownership.
- Watch out
- Use real examples.
Q13Essay 3
Explain the factors that determine a firm’s demand for labour.
Essay stimulus. The UK government announced that the National Living Wage (NLW) would rise to £11.44 in April 2024 (for those aged 21 and over). This is around 66% of median hourly income, a big rise compared with its introduction in 1999, when it was only 45% of median hourly income. Some firms have warned that this increase in the NLW will lead to a fall in the number of workers they employ.
TopicThe labour marketLabour demand & supply
Examiner insight
- What to cover
- Demand for labour is derived from demand for the product. It depends on the wage, marginal revenue product (productivity and product price), the price of capital and other factors.
- Watch out
- Explain derived demand clearly.
Q14Essay 3
Assess the view that a national minimum wage, such as the UK’s National Living Wage, contributes to an improvement in economic welfare.
Essay stimulus. The UK government announced that the National Living Wage (NLW) would rise to £11.44 in April 2024 (for those aged 21 and over). This is around 66% of median hourly income, a big rise compared with its introduction in 1999, when it was only 45% of median hourly income. Some firms have warned that this increase in the NLW will lead to a fall in the number of workers they employ.
TopicThe labour marketMinimum wage
Examiner insight
- What to cover
- A national minimum wage raises pay for low-paid workers and may raise productivity and reduce poverty.
- Diagram
- Minimum wage diagrams for competitive and monopsony labour markets.
- Evaluation
- It can reduce employment where demand is elastic and raise prices. Judge by the level relative to median pay and the evidence since 1999.
- Watch out
- Define economic welfare before you judge it.
Question text is quoted from the question papers, © AQA, for students’ private study. Open the official papers and mark schemes from the links on each question. Examiner insights are written with AI assistance and moderated by Finn.