Economics and Management Oxford Interview Questions

Valuable Economics and Management questions to help you prepare for your Oxford interview, written by our Oxbridge-graduate tutors.

Question 1
Why might one carmaker build its cars largely by hand while a rival builds them by machine?

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Think about what each method does to the cost of making one more car, and to what the customer is really paying for. One firm sells large volumes of affordable, near-identical cars; the other sells a few very expensive, distinctive ones. Ask how the production method fits the kind of product and customer each is chasing.

Question 2
Why are diamonds so expensive and steel so cheap, when steel is far more useful?

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Separate how useful something is in total from how much one extra unit is worth. Steel is enormously useful but abundant, so ask what an additional unit adds when supply is plentiful compared with when it is scarce, and how scarcity and demand together settle the price.

Question 3
Why is a film actor far wealthier than an equally talented stage actor?

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Ask how many people each performer can reach with a single performance. A stage actor's audience is capped by the size of the theatre, so think about what changes when a performance can be copied and sold to millions at almost no extra cost, and what that does to the earnings of those at the very top.

Question 4
What makes a good leader, and is it the same thing as being a good manager?

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Try to separate the two roles. One might be about setting direction and persuading people to follow it; the other about organising resources and processes to deliver reliably. Ask whether the same person needs both, and which matters more in different situations a company might face.

Question 5
If markets are so efficient, why do firms exist at all, rather than every task being bought and sold between individuals?

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Imagine trying to hire each separate task by contract, moment to moment, instead of bundling people together into a firm. Think about the costs of finding, negotiating with, monitoring and enforcing all those separate deals, and what a firm saves by replacing them with ongoing employment.

Question 6
A company’s owners want maximum profit, while its managers would quite like an easy life. How could the owners design pay so the managers want what they want?

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The owners cannot watch everything the managers do, so think about how to make the managers' own interests line up with theirs. Consider tying reward to results, then the new problems that creates, such as managers gaming whatever is measured or avoiding sensible risks.

Question 7
A used-car market contains good cars and bad ones, and only the seller knows which is which. What happens to the market?

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If buyers cannot tell good from bad, they will only pay a price reflecting the average. Ask what that average price does to someone trying to sell a genuinely good car, then follow the chain: who withdraws from the market first, and what happens to the average quality that is left.

Question 8
Why might a firm spend heavily on advertising that conveys nothing factual about the product?

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If the advert tells you nothing concrete, ask what the sheer fact of spending so much money might itself signal. Only certain kinds of firm can afford lavish advertising and expect to recoup it, so consider what that tells a buyer about quality or about the firm's confidence it will be around for the long run.

Question 9
Why do almost-identical products sell at very different prices under different brand names?

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Ask what a buyer is really paying for beyond the physical product, such as trust, status, or simply reduced risk of disappointment. Then think about how a brand turns an otherwise interchangeable good into something a firm can charge more for, and why competition does not just erase the difference.

Question 10
What stops a highly profitable monopoly from simply attracting competitors until its profit disappears?

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In theory, high profits should lure rivals in until the profit is competed away. Ask what could block new firms from entering, such as large set-up costs, control of a scarce input, patents, or strong customer loyalty, and how a monopoly might deliberately build and defend those walls.

Ten more to go

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Question 11
Why are large, established companies so often worse at radical innovation than small newcomers?

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Ask what an established firm stands to lose from an innovation that disrupts its own profitable existing product. Compare its incentives with those of a newcomer that has nothing to cannibalise, and think about how size, habit and bureaucracy affect willingness to take a radical risk.

Question 12
Why might a firm choose to pay its workers more than it strictly needs to?

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Paying above the going rate looks wasteful, so ask what the firm gets back for it. Think about effort, staff turnover, the quality of people who apply, and how much a worker stands to lose by being sacked from a job that pays better than the alternatives.

Question 13
A product becomes more useful to each user the more people use it. What does that imply for competition between rival platforms?

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If every extra user makes the product more valuable to everyone else, ask what that does to an early lead. Think about why users tend to converge on whatever others already use, and whether that produces many healthy competitors or a market that tips toward one or two winners.

Question 14
Two firms must each decide, without communicating, whether to launch a rival product into a market too small to support both. What happens?

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Lay out what each firm earns in every combination: both launch, only one launches, or neither does. If both launching means losses, while staying out risks letting the other take a profit, ask what each does when it can neither trust nor talk to the other, and whether the outcome is even predictable.

Question 15
Two rival coffee chains are opening branches along a single high street, with shoppers spread evenly along it. Where will each choose to put its shop, and why do such rivals so often end up side by side?

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Picture each chain capturing the shoppers nearer to it. Ask how a chain could shift its branch to win some of its rival's customers, and where the two end up once neither can gain anything by moving again. Then ask whether that location is the best one for the shoppers.

Question 16
A stranger is handed £100 and must offer you some share of it. If you reject the offer, neither of you keeps anything, and you will never meet again. What is the smallest offer you should rationally accept, and do real people behave that way?

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Treat yourself first as a cold calculator: since any positive amount beats walking away with nothing, what is the least you should be willing to accept? Then ask why real people reject offers that are small but still positive, and what that reveals about the cold-calculator assumption.

Question 17
Two countries begin with similar populations and resources, yet decades later one is far richer per person than the other. What could account for such a gap?

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A worker's output depends on far more than effort. Think about what each country's workers have to work with, such as machinery, infrastructure, education and the rule of law, and how small early differences in those can compound into a huge gap over decades.

Question 18

A firm is the only seller of a product. The quantity it can sell falls as the price rises, according to \( q = a - bp \), where \( a \) and \( b \) are positive constants, and each unit costs a constant \( c \) to produce. What price maximises the firm's profit, how do you know it is a maximum, and how does the best price change as \( c \) rises?

Show a hint

Write profit as revenue minus cost, with revenue as price times quantity and quantity given by the demand curve. Express profit in terms of the price \(p\), differentiate and set the result to zero to find the best price, then check the second derivative confirms a maximum. Finally see how that price shifts when \(c\) rises.

Question 19
A consultant notices that companies with table-football in the office tend to grow faster, and concludes that installing games causes growth. Why should a manager be sceptical?

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Ask what kind of company tends to install playful perks in the first place, before any effect on growth. Then consider whether the perk drives the growth, or simply comes along with the sort of young, well-funded firm that was already going to grow, and what evidence would tell the two apart.

Question 20
Could a country prosper by specialising entirely in finance, design and software, importing every physical good it needs?

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Ask what such a country still depends on from abroad, and whether producing no physical goods itself is really a problem so long as it can trade. Think about comparative advantage, and what the country would sell in exchange for the goods it chooses not to make.

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