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S6 Economics: Market Structure and Firm Behaviour (Paper 4: mistake clinic)
S6 Economics: Market Structure and Firm Behaviour (Paper 4: mistake clinic)
This last paper revisits three frequent errors: mixing up the pricing role, misreading concentration measures and assuming monopoly always profits.
Direct answers Spend three seconds checking those three points after every question, which works better than rereading the notes.
01 Paper details (check answers afterwards)
| Item | Detail |
|---|---|
| Questions | 10 |
| Suggested time | 20 |
| Difficulty mix | Foundation 3 · Intermediate 3 · Challenge 3 · Error redo 1 |
| Chapter | Chapter: S6 Economics: Market Structure and Firm Behaviour |
| Level | S6 Economics |
02 Questions (10 items)
- FoundationThe demand curve facing a perfectly competitive firm is horizontal. What does that mean?
- FoundationWhat four criteria distinguish market structures?
- FoundationA monopolist is a price maker. What does that actually mean?
- IntermediateDemand is P equals 80 minus Q. What are price and total revenue at Q of 20?
- IntermediateFor the same demand, what is marginal revenue at Q of 20 and is marginal cost of 40 dollars at the profit maximum?
- IntermediateFour firms each hold 25 per cent. What are the index and CR2?
- ChallengeMarket sales total 40 million dollars and the top three firms sell 12, 8 and 4 million. What is CR3?
- ChallengeTwo colluding firms set output at 30 units with a price of 50 dollars and marginal cost of 20. What is total profit?
- ChallengeIf a market has a single firm with 100 per cent, what is the index?
- Error redoA student says a monopolist must earn economic profit. What is wrong?
03 Answers and one-line notes
| # | Answer | One-line note |
|---|---|---|
| 1 | Demand is perfectly elastic, so any price rise sells nothing | At the market price the firm can sell any quantity, while a slightly higher price sells none, so elasticity is infinite. |
| 2 | Number of firms, product homogeneity, barriers to entry and the firms influence over price | All four must be read together, because the number of firms alone confuses oligopoly with monopolistic competition. |
| 3 | It may choose price or output but is still constrained by the market demand curve | Being a price maker does not allow any price at all, since a higher price sells less and the chosen point must lie on the demand curve. |
| 4 | A price of 60 dollars and revenue of 1,200 dollars | Substituting gives 80 minus 20 which is 60, and revenue is 60 times 20 which is 1,200. |
| 5 | Marginal revenue is 40 dollars and yes, it is the profit maximum | Marginal revenue of 80 minus 2Q equals 40, exactly matching marginal cost, so 20 units is the best output. |
| 6 | An index of 2,500 and CR2 of 50 per cent | Four times 625 is 2,500 while the top two hold 50 per cent, so even shares keep the index low. |
| 7 | 60 per cent | The top three together sell 24 million out of 40 million, and the denominator of a concentration ratio is always the whole market. |
| 8 | 900 dollars | Profit per unit is 30 and thirty units give 900, because cartel profit depends on holding output down and price up. |
| 9 | 10,000, the theoretical maximum | A hundred squared is ten thousand, and any market with more than one firm must fall below that. |
| 10 | It is wrong because if demand lies below the average total cost curve the firm makes a loss in the short run | Monopoly guarantees pricing power, not profit, and with high costs or weak demand the best output still prices below average total cost. |
04 What to do after marking
- After marking, redo only the wrong items and write down which step went wrong (formula, unit, or misread number).
- Repeat the same item two days later; move to the next paper only when both attempts are correct.
- Parents only need the answer and note columns; there is no need to explain every item.
Keep three columns in the error log: question, cause, corrected steps. The three commonest slips here are confusing a price taker with a price maker, treating a concentration ratio as a Herfindahl index, and assuming a monopoly must be profitable.Tutor Registration →
Questions and answers are written originally by the TutorZone team and are not taken from any school, publisher or examination authority paper. Every value is checked by computer.