Lesson 3.5.3

3.5.3 Wage determination in competitive and non-competitive markets Quiz: Pearson Edexcel Economics, Unit 3

20 questions

Written by Revision Ninja · Last reviewed 11 October 2026

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Lesson 3.5.3, Wage determination in competitive and non-competitive markets: 20 multiple choice questions for the Pearson Edexcel Economics (9EC0), Unit 3: Theme 3: Business behaviour and the labour market, written with Revision Ninja.

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The 20 questions

  1. At what point is the equilibrium wage rate determined in a competitive labour market?

    • Total revenue is maximised
    • Average cost is minimised
    • Demand equals supply
    • Marginal cost equals zero

  2. What is a monopsony in a labour market?

    • A trade union
    • A competitive market
    • A sole worker
    • A sole employer

  3. What is the likely effect of a trade union setting wages above competitive equilibrium?

    • Increased labour demand
    • Lower labour supply
    • Eliminated unemployment
    • Reduced employment level

  4. What market outcome occurs when a minimum wage is set above competitive equilibrium?

    • Excess labour demand
    • Excess labour supply
    • Market clearing
    • Labour shortage

  5. Which mechanism is used by governments for public sector wage setting in the UK?

    • Pay review bodies
    • Monopoly commissions
    • Trade tariffs
    • Stock exchange indices

  6. What is a direct risk of freezing public sector pay while private sector pay grows?

    • Higher productivity
    • Decreased mobility
    • Staff shortages
    • Lower inflation

  7. If the demand for labour is elastic, a wage increase will cause employment to:

    • Rise sharply
    • Fall slightly
    • Stay constant
    • Fall sharply

  8. Demand for labour is 100 - 2W and supply is 20 + 3W (both in workers, W in £). What is the equilibrium wage?

    • £10
    • £14
    • £16
    • £20

  9. Using the same market (demand 100 - 2W, supply 20 + 3W), how many workers are employed at equilibrium?

    • 32 workers
    • 52 workers
    • 68 workers
    • 80 workers

  10. With demand 100 - 2W and supply 20 + 3W, a £20 minimum wage creates a surplus of:

    • 40 workers
    • 60 workers
    • 20 workers
    • 80 workers

  11. What is the main labour market effect when public sector wages are frozen while private wages rise?

    • Higher labour productivity
    • Increased labour turnover
    • Lower geographical mobility
    • Reduced wage inequality

  12. Why do trade unions usually have weaker bargaining power in low-skilled industries?

    • High worker replaceability
    • High entry barriers
    • Inelastic labour supply
    • Strict government regulation

  13. How does a more elastic labour supply affect the surplus caused by a minimum wage?

    • Eliminates surplus
    • Increases surplus
    • Has no effect
    • Decreases surplus

  14. Which term describes a situation where available workers lack the qualifications required by employers?

    • Job friction
    • Wage drift
    • Monopsony power
    • Skills gap

  15. In which market structure can introducing a statutory minimum wage potentially increase both wages and employment?

    • Monopsony
    • Monopolistic competition
    • Perfect competition
    • Oligopoly

  16. A union raises the wage from £16 to £20 in a market where labour demand is 100 - 2W. By how many workers does employment fall?

    • 4 workers
    • 12 workers
    • 8 workers
    • 20 workers

  17. Which factor primarily prevents regional wage differences from equalising across the UK?

    • Occupational mobility
    • Perfect information
    • Minimum wage laws
    • Geographical immobility

  18. Unlike private sector pay, public sector wage determination is heavily influenced by:

    • Marginal revenue product
    • Shareholder dividends
    • Profit maximisation
    • Government fiscal targets

  19. If demand for labour is inelastic, introducing a higher minimum wage will cause total wage expenditure to:

    • Increase
    • Remain unchanged
    • Decrease
    • Fall to zero

  20. The claim that competitive markets generate a 'fair' distribution of wages is an example of a:

    • Positive statement
    • Factual statement
    • Testable hypothesis
    • Normative statement

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