Lesson 1.1.1b

1.1.1b Competition, risk and uncertainty in markets Quiz: Pearson Edexcel Business, Unit 1

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 1.1.1b, Competition, risk and uncertainty in markets: 20 multiple choice questions for the Pearson Edexcel Business (9BS0), Unit 1: Marketing and people, written with Revision Ninja.

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The 20 questions

  1. Which market structure features many small businesses selling identical products with no entry barriers?

    • Perfect competition
    • Monopolistic competition
    • Oligopoly
    • Monopoly

  2. Which market structure features many businesses selling differentiated products with low barriers to entry?

    • Monopolistic competition
    • Pure monopoly
    • Duopoly
    • Perfect competition

  3. What term describes a factor that makes it difficult or costly for new firms to enter a market?

    • Operating margin
    • Barrier to entry
    • Dynamic risk
    • Market growth

  4. Which of these is a recognised form of non-price competition for a business?

    • Price cutting
    • Customer service
    • Price matching
    • Price discounting

  5. A business estimates a project success chance using past data. What concept does this illustrate?

    • Complacency
    • Inelasticity
    • Uncertainty
    • Risk

  6. Which strategic option is most effective at reducing a firm's exposure to overall market risk?

    • Predatory pricing
    • Price skimming
    • Market penetration
    • Diversification

  7. A market has three firms with shares of 50%, 30% and 20%. What is the combined share of the two largest firms?

    • 80%
    • 90%
    • 50%
    • 70%

  8. A firm faces a 30% chance of a £40,000 loss and a 70% chance of a £10,000 gain. What is the expected value?

    • £7,000
    • -£12,000
    • -£5,000
    • £5,000

  9. A firm expects £80,000 if demand is strong (probability 0.4) and £50,000 if demand is weak (probability 0.6). What is the expected profit?

    • £110,000
    • £50,000
    • £80,000
    • £62,000

  10. Which market condition is most likely to cause an increase in competitive rivalry?

    • High capital costs
    • Strong brand loyalty
    • Low entry barriers
    • High entry barriers

  11. What primary financial risk does a firm with high fixed costs face when market demand falls?

    • Guaranteed profits
    • Falling variable costs
    • High operating losses
    • Zero sunk costs

  12. Which condition makes a business scenario an example of uncertainty rather than risk?

    • High interest rates
    • Calculated probabilities
    • Unknown probabilities
    • Measurable likelihoods

  13. A rival launches a lower-priced direct substitute. What is the most likely impact on the original firm?

    • Increased sales volume
    • Lower fixed costs
    • Reduced market share
    • Higher profit margins

  14. In a highly competitive market, which pricing action is a firm least likely to choose?

    • Matching rival prices
    • Raising prices sharply
    • Offering promotions
    • Cutting prices

  15. What is the primary purpose of carrying out scenario analysis for a business?

    • Flexible planning
    • Fixed budgeting
    • Guaranteeing profits
    • Eliminating all risk

  16. Project X returns £50,000 for certain. Project Y gives a 60% chance of £100,000 and a 40% chance of £0. Which has the higher expected value, and by how much?

    • Project X, by £50,000
    • Project X, by £10,000
    • Project Y, by £10,000
    • Project Y, by £60,000

  17. How does intense market competition primarily limit long-run profit margins for incumbent firms?

    • Increasing fixed costs
    • Driving down prices
    • Raising entry barriers
    • Reducing total demand

  18. What is the main opportunity cost of a manager taking a risk-averse approach?

    • Foregone high returns
    • Lower business liquidity
    • Increased fixed costs
    • Uncontrollable losses

  19. How can high barriers to entry negatively affect an incumbent firm over time?

    • Lowering product prices
    • Increasing rival competition
    • Encouraging management complacency
    • Reducing profit margins

  20. A project has a 0.25 chance of £300,000 profit and a 0.75 chance of a £40,000 loss. What is the expected profit?

    • £30,000
    • £260,000
    • £75,000
    • £45,000

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