Process
OCR A-Level Economics H460
Introduction to Microeconomics
Topic overviewEconomic and free goods, scarcity and positive and normative statementsEconomic agents and the factors of productionFactor rewards, rationality and the objectives of economic agentsIncentives and the functions of the price mechanismMarket, planned and mixed economies and allocative and productive efficiencyOpportunity cost, trade-offs and the production possibility curveShifts of the production possibility curve and uses of opportunity cost
Microeconomics: The Role of Markets
Topic overviewSpecialisation, the division of labour and barterMoney as a medium of exchange and the gains from specialisationIndividual and market demand and joint, competitive and composite demandMovements along and shifts of the demand curveIndividual and market supply and joint and competitive supplyMovements along and shifts of the supply curveConsumer surplus and producer surplusHow changes in price affect consumer and producer surplusCeteris paribus and market equilibrium and disequilibriumChanges in demand and supply and their effects on related marketsPrice and income elasticity of demand and total revenueCross elasticity, price elasticity of supply and the uses of elasticityMarginal utility, marginal cost and decisions at the marginMarket failure and marginal social cost and benefitPositive and negative production and consumption externalitiesInformation failure, asymmetric information and merit and demerit goodsMerit and demerit good diagrams and correcting information failurePublic, private and quasi-public goodsThe free rider problem and the provision of public goodsIndirect taxes and subsidies to correct market failureState provision, price controls, buffer stocks and legislationRegulation, tradable pollution permits and government failure
Microeconomics: Business Objectives
Topic overviewProfit maximisation and alternative business objectivesCorporate social responsibility and the principal-agent problemFixed, variable, average and marginal costsDiminishing returns and economies and diseconomies of scaleTotal, average and marginal revenueProfit, loss and normal and supernormal profit
Microeconomics: Market Structures
Topic overviewPerfect competition in the short and long run and allocative efficiencyProductive efficiency and perfect competition as a benchmarkMonopoly characteristics, equilibrium and static efficiencyDynamic efficiency, price discrimination and natural monopolyCharacteristics of monopolistic competition and its short run equilibriumLong run equilibrium and efficiency in monopolistic competitionCharacteristics of oligopoly, concentration ratios and the kinked demand curveNon-price competition, collusion and the pros and cons of oligopolyCharacteristics of contestable markets, sunk costs and hit-and-run entryEfficiency, barriers and the limits of contestable markets
Microeconomics: The Labour Market
Topic overviewDerived demand for labour and wage elasticity of demandLabour productivity, unit labour costs and marginal revenue productSupply of labour and wage elasticity of supplyShort and long run labour supply, transfer earnings and economic rentWage differentials, labour mobility and monopsonyTrade unions, bilateral monopoly and the effects of monopsonyWage determination in a competitive labour market and labour market flexibility
Macroeconomics: Aggregate Demand and Aggregate Supply
Topic overviewThe circular flow of income, injections and leakagesMethods of measuring national incomeComponents of aggregate demand and their determinantsThe slope of the aggregate demand curve and what shifts itConsumption, income and the role of expectationsShort run and long run aggregate supply curvesShifts in short run and long run aggregate supplyMacroeconomic equilibrium and the effects of demand and supply shiftsThe national income multiplier and marginal propensitiesThe accelerator, the economic cycle and output gaps
Macroeconomics: Economic Policy Objectives
Topic overviewEconomic growth, real and nominal GDP and GDP per capitaShort and long run growth, the economic cycle and the effects of growthEconomic structure, deindustrialisation and sustainable developmentLimitations of GDP and the Human Development IndexEmployment, unemployment rates and the objective of full employmentMeasures, types and costs of unemployment and the effects of full employmentInflation, deflation, real values and the CPI and RPICalculating inflation with index numbers and its causes and consequencesBalance of payments accounts and current account calculationsCauses and consequences of current account imbalancesKey trends in UK macroeconomic performanceComparing UK performance internationally and the limits of economic dataIncome and wealth, redistribution and absolute and relative povertyLorenz curves, the Gini coefficient and the causes of povertyThe natural rate of unemployment and Keynesian and neo-classical aggregate supplyShort and long run Phillips Curves and their usefulness
Macroeconomics: Implementing Policy
Topic overviewThe government budget, types of tax and the budget balanceNational debt, cyclical and structural deficits and crowding outThe Laffer curve, average and marginal tax rates and limits of fiscal policyInterest rates, the money supply and inflation targetsQuantitative easing, the exchange rate and limits of monetary policyPrivatisation, deregulation and subsidies as supply side policiesCompetition policy, infrastructure, education and tax and benefit reformLabour market flexibility, immigration control and limits of supply side policyConflicts between macroeconomic policy objectives
Macroeconomics: The Global Context
Topic overviewPatterns of international trade and global supply chainsAdvantages and disadvantages of international tradeExchange rate calculations and how exchange rates are determinedExchange rate changes, the Marshall-Lerner condition and exchange rate systemsGlobalisation, international competitiveness and comparative advantageTerms of trade and the impact of globalisation and emerging economiesProtectionism and the effects of a tariffQuotas, trade creation, economic integration and the World Trade Organisation
Macroeconomics: The Financial Sector
Topic overviewFunctions of money, credit creation and narrow and broad moneyThe quantity theory of money and interest rates in the money marketRoles of the financial sector, saving and investmentThe Harrod-Domar model and microfinanceFinancial regulation and the functions of a central bankMonetary policy effectiveness, limits of regulation and the IMF
Quantitative Skills for Economics
Themes in Economics: Synoptic Application
Microeconomics: Business Objectives
- 6 subtopics
- 18 things to know
- Component 01
What Microeconomics: Business Objectives covers
Business Objectives is examined on component 01 of OCR Economics, Microeconomics. 77 recall questions across 6 subtopics.
Where it is assessed
Component 01
Microeconomics, the whole of the first paper.
Check the OCR specification ↗The 6 subtopics
Each one has its own page.
- Profit maximisation and alternative business objectivesRecall questions on profit, sales revenue and sales volume maximisation, growth, utility maximisation, profit satisficing by managers, and social welfare objectives of firms.Open →
- Corporate social responsibility and the principal-agent problemRecall questions on corporate social responsibility, the principal-agent problem and the divorce of ownership from control, and what shapes a firm's choice of objective.Open →
- Fixed, variable, average and marginal costsRecall questions on fixed, variable, total, average and marginal costs with worked calculations, the marginal cost and average cost relationship, and the short run versus the long run.Open →
- Diminishing returns and economies and diseconomies of scaleRecall questions on the law of diminishing returns and product curves, internal and external economies of scale, diseconomies of scale, minimum efficient scale and scale as a barrier to entry.Open →
- Total, average and marginal revenueRecall questions on total, average and marginal revenue calculations, why average revenue is the demand curve, marginal revenue for price takers and price makers, and elasticity where marginal revenue is zero.Open →
- Profit, loss and normal and supernormal profitRecall questions on profit and loss calculations, the profit-maximising rule, accounting, normal, supernormal and economic profit, and the short run shutdown decision.Open →
What you need to know
Answer each one before you reveal it.
Your recallNot started
Key term
A firm's total fixed costs are £4,800 and it produces 400 units. Calculate its average fixed cost.
Key term
Why does the average fixed cost curve fall continuously as output rises?
Process
How does the law of diminishing returns shape the short run marginal cost curve?
Key term
What is on each axis of the long run average cost diagram, and what shape does the curve take?
Key term
Why do economies of scale act as a barrier to entry, and why does their significance differ between industries?
Key term
Define total revenue and state how it is calculated.
Key term
Why does standard theory assume firms maximise profit?
Evaluation
Why does CSR often conflict with profit in the short run?
Process
How does the intensity of competition affect a firm's freedom to choose an objective?
Numbers
A firm's total revenue is £480,000 and its total cost is £415,000. Calculate its profit.
Key term
Define accounting profit.
Key term
Define supernormal profit.
Key term
What condition must hold at a firm's profit-maximising output?
Key term
Define corporate social responsibility.
Key term
Define a variable cost.
Numbers
A firm sells 4,000 units at £15 each. Calculate its total revenue.
Key term
What does it mean for profit if average revenue equals average cost at the profit-maximising output?
Take Microeconomics: Business Objectives further
The same content, four other ways.
Commonly confused
Pairs that lose marks when they are blurred together.
Fixed cost vs Variable cost
Fixed cost: a cost that does not vary with output and must be paid even at zero production. Variable cost: a cost that rises and falls directly with the level of output.
Accounting profit vs Normal profit
Accounting profit: total revenue less the explicit money costs a firm has paid out. Normal profit: the minimum return needed to keep a firm in its present line of business.
Marginal cost vs Marginal revenue
Marginal cost: the addition to total cost from producing one more unit. Marginal revenue: the addition to total revenue from selling one more unit.
Questions from this topic
Each one with the model answer underneath.
- 1
What condition must hold at a firm's profit-maximising output?
Model answer
Marginal cost must equal marginal revenue, with marginal cost rising through marginal revenue at that output.
- 2
Why does standard theory assume firms maximise profit?
Model answer
Profit maximisation gives owners the highest possible return and produces a single determinate output for the firm, which makes its behaviour predictable.
- 3
State the condition for sales revenue maximisation.
Model answer
Sales revenue is maximised at the output where marginal revenue equals zero.
- 4
A firm abandons profit maximisation for revenue maximisation. What happens to its price and output?
Model answer
Output rises and price falls, because the firm keeps expanding past the point where marginal cost equals marginal revenue until marginal revenue reaches zero.
- 5
How does sales volume maximisation differ from sales revenue maximisation?
Model answer
Volume maximisation targets the largest number of units the firm can sell while still covering all its costs, so average revenue equals average cost, whereas revenue maximisation stops where marginal revenue is zero.
- 6
On a single diagram of a firm's cost and revenue curves, which lies furthest to the right: the profit-maximising, revenue-maximising or volume-maximising output?
Model answer
The volume-maximising output is furthest right, the revenue-maximising output is next, and the profit-maximising output is the smallest of the three.
What is inside Levo
Six ways to work the same material.
Microeconomics: Business Objectives revision questions
- What does Microeconomics: Business Objectives cover in OCR A-Level Economics?
- 6 subtopics: profit maximisation and alternative business objectives, corporate social responsibility and the principal-agent problem, fixed, variable, average and marginal costs, diminishing returns and economies and diseconomies of scale, total, average and marginal revenue and profit, loss and normal and supernormal profit. Each one has its own page with questions and model answers.
- How is Microeconomics: Business Objectives organised?
- By the OCR H460 specification, subtopic by subtopic, so it matches the order you are taught it in.
Every question in Microeconomics: Business Objectives, on a schedule.
Attempt a question from memory, write the correct version, then attempt it again. Levo records the jump between your first attempt and your last, and brings each question back on the day you are due to forget it.
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