WJEC · Microeconomics · Market structures
WJEC Economics past paper questions: Market structures
Every WJEC question on Market structures from 2017 to 2025: 14 essays, 4 data response questions and 3 short answer questions. It covers Costs, revenues and profit and Demand, supply and elasticity. Each question links to its paper, mark scheme and examiner report.
SubtopicsCosts, revenues and profit 3Demand, supply and elasticity 1
Essay questions on market structures
Explain, using relevant diagrams, the difference between the shape of the average and marginal revenue curves for both perfect competition and monopolistic competition.
Examiner insight
- What to cover
- Keep the answer on AR and MR only. In perfect competition the firm is a price taker, so AR equals MR and both are horizontal. In monopolistic competition the firm has some price setting power, so AR slopes down and MR falls twice as steeply because price must be cut on every unit to sell more.
- Watch out
- Do not turn this into an account of the two market structures, because that material is not credited. Link AR to elasticity and explain why MR falls more sharply. A short numerical revenue table is an effective way to earn the analysis marks.
With the use of an appropriate diagram(s), discuss how a large firm in an oligopolistic market structure can increase both its market share and profits.
Examiner insight
- What to cover
- Both targets must run through the answer: market share and profit. Take strategies such as advertising and branding, mergers and takeovers, collusion, and price cutting or predatory pricing, and for each show the effect on output or share and on profit.
- Watch out
- The commonest failing was an imbalanced answer that drifted onto profit or onto share alone, and a one way analysis of each strategy with no counter argument, which capped AO4.
Using examples, explain the role of barriers to entry in determining market structure.
Examiner insight
- What to cover
- Three things are needed: explain barriers to entry, give real world examples, and link each barrier to the market structure it produces. Cover natural barriers such as high fixed costs and economies of scale, and behavioural or strategic ones such as limit pricing, branding and patents.
- Watch out
- Limited use of real examples was the most common reason for missing the top band on AO1 and AO3, and some answers never related the barriers to specific market structures.
With reference to game theory and your own examples, evaluate the likely costs of oligopolistic market structures.
Examiner insight
- What to cover
- Set out the costs of oligopoly, using game theory and named examples: collusion and price fixing, higher prices and lower consumer surplus, restricted output, wasteful non price competition, barriers to entry.
- Watch out
- Two things stopped answers reaching the top band: no real examples, and describing game theory without saying why it demonstrates a cost of oligopoly. Do not treat costs and benefits as two isolated halves.
Assess the reasons why the reduction of monopoly power in an economy may not be entirely desirable.
Examiner insight
- What to cover
- Answer the precise question: why cutting monopoly power may not be wholly desirable. Use economies of scale and lower average cost, abnormal profit funding research and dynamic efficiency, natural monopoly, and international competitiveness of large national firms.
- Watch out
- A general pros and cons of monopoly essay was Band 2. Band 3 needed the focus on the effects of reducing monopoly power.
Using a diagram and examples, explain what is meant by a monopolistically competitive market structure.
Examiner insight
- What to cover
- Cover every demand of the question: the characteristics of monopolistic competition (many firms, differentiated products, low barriers to entry, downward sloping but elastic demand), a diagram, and real examples such as hairdressers, restaurants or builders.
- Watch out
- Examples were widely treated as an afterthought, and many diagrams were inaccurate. Do not confuse this structure with monopoly or oligopoly, which made it hard to award any marks at all.
Evaluate the view that firms in monopolistically competitive markets are always less efficient than firms in other market structures.
Examiner insight
- What to cover
- Take the three efficiencies in turn, productive, allocative and dynamic, and compare monopolistic competition with at least two other structures, giving the reason in each case rather than asserting it.
- Watch out
- Middling answers stated the efficiencies and related them to monopoly and perfect competition with assertions and no analysis, staying entirely in theory. If you wrote about the wrong structure in part (a), the error carries forward.
Using a numerical example, explain how game theory can be used to illustrate price leadership in oligopolies.
Examiner insight
- What to cover
- Build a 2 by 2 payoff matrix with real numbers for two firms choosing to follow or not follow a price change. Work through the payoffs, identify the dominant strategies and the Nash equilibrium, then use it to explain why rivals follow a price leader.
- Watch out
- Most candidates drew a matrix but then got confused interpreting their own numbers, and few actually addressed price leadership, whether prices are rising or falling. Analyse the matrix, do not just present it.
"Oligopoly is the most desirable market structure." Discuss.
Examiner insight
- What to cover
- Give the case for oligopoly: price rigidity aiding confidence and planning, non price competition and choice, abnormal profits funding research and dynamic efficiency, economies of scale in the large firms.
- Watch out
- Do not assume every firm in an oligopoly is large. Oligopolies often contain many small firms alongside the dominant ones.
Explain, using diagrams, why firms in perfect competition are regarded as efficient.
Examiner insight
- What to cover
- Take each efficiency in turn and explain the mechanism, not just the label. Productive efficiency because free entry drives price to minimum AC, allocative efficiency because P equals MC when AR equals MR equals price, X efficiency because normal profit leaves no room for slack.
- Watch out
- Most candidates stated that the firm is productively, allocatively and X efficient but never explained precisely why, and lost the higher marks for it.
Evaluate the view that competition authorities should ban firms from using price discrimination.
Examiner insight
- What to cover
- The question is whether a ban is appropriate. Explain the conditions for price discrimination and its effects on consumer surplus, producer surplus and output, then argue about whether prohibition is the right response.
- Watch out
- Long definitions and painstaking diagrams gained few marks unless they were used in the argument. Answers that weighed the pros and cons of price discrimination in general, rather than of banning it, could not reach the top marks.
Explain what is meant by a contestable market and, using a diagram, explain why firms in a contestable market tend to earn only normal profit.
Examiner insight
- What to cover
- Define contestability by low barriers to entry and exit and low sunk costs, with new entrants having access to the same technology as incumbents. The key mechanism is the threat of entry: incumbents cut price to normal profit level, or use limit pricing, to avoid attracting hit and run competition.
- Watch out
- Any market can be contestable, including one that looks like a monopoly on concentration ratios. Do not simply describe long run equilibrium in perfect competition or monopolistic competition. The missing idea in most answers was that the threat alone is enough.
Discuss the view that firms in an oligopoly must always be heavily regulated in order to prevent collusion.
Examiner insight
- What to cover
- Three blocks of knowledge are needed: oligopoly (few firms, interdependence, high concentration), collusion (overt and tacit, the incentive to act as a monopolist), and regulation (competition authorities, fines, price controls, breaking up cartels).
- Watch out
- Most answers were strong on collusion and weak on regulation, which is half the question. Not one script seen by the Principal drew the kinked demand curve and its MR correctly, and long Prisoners Dilemma detours were rarely made relevant.
Explain what is meant by monopoly and, using a diagram, explain why a monopoly may have lower average costs of production than a firm in perfect competition.
Examiner insight
- What to cover
- Define monopoly properly, by price setting power and high barriers to entry, not just a large market share. Then give two reasons for lower average cost: economies of scale from large scale output, and abnormal profits funding investment and dynamic efficiency.
- Watch out
- The comparison is the question. Say why the perfectly competitive firm cannot get the same benefits: it is too small for scale economies and earns only normal profit, so it cannot fund investment. Keep the answer about average costs, not costs in general.
Data response questions on market structures
(i) On Saturday 3rd August 2024 between 06.00 and 11.59 the ticket price was 14% higher than the price between 00.00 and 05.59 on the same day. To the nearest whole number calculate the price of this ticket. (ii) Outline how Getlink might be using price discrimination.
Discuss whether it is only producers that benefit from price discrimination.
Define the term 'interdependence'.
Using the data and your own knowledge, explain two conditions under which price collusion is more likely to occur.
Short answer questions on market structures
Evaluate the extent to which China has monopoly power over the supply of rare-earth metals.
Examiner insight
- What to cover
- Build the case for Chinese monopoly power from the data on market share, control of processing and pricing power, and connect each piece of evidence to why it gives power over price or supply.
- Watch out
- Quoting China's market share gains AO2 but not AO3. The analysis mark comes from explaining why that share means monopoly power.
Calculate the 2-firm concentration ratio for the selected UK coffee shop companies.
Using an example, describe how coffee shop companies could compete using non-price competition.
Question text is quoted from the question papers, © WJEC CBAC Ltd, 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.