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Unit 11
Top of Form
Firms in perfect competition face a:
a) Perfectly elastic demand curve
b) Perfectly inelastic demand curve
c) Perfectly elastic supply curve
d) Perfectly inelastic supply curve
In perfect competition:
a) The price equals the marginal revenue
b) The price equals the average variable cost
c) The fixed cost equals the variable costs
d) The price equals the total costs
A profit maximising firm in perfect competition produces where:
a) Total revenue is maximised
b) Marginal revenue equals zero
c) Marginal revenue equals marginal cost
d) Marginal revenue equals average cost
In perfect competition:
a) The products firm offer are very similar
b) Products are heavily differentiated
c) A few firms dominate the market
d) Consumers have limited information
In the long run in perfect competition:
a) The price equals the total revenue
b) Firms are allocatively inefficient
c) Firms are productively efficient
d) The price equals total cost
In perfect competition:
a) Short run abnormal profits are competed away by firms leaving the industry
b) Short run abnormal profits are competed away by firms entering the industry
c) Short run abnormal profits are competed away by the government
d) Short run abnormal profits are competed away by greater advertising
In perfect competition:
a) A few firms dominate the industry
b) Firms are price makers
c) There are many buyers but few sellers
d) There are many buyers and sellers
In the short run firms in perfect competition will still produce provided:
a) The price covers average variable cost
b) The price covers variable cost
c) The price covers average fixed cost
d) The price covers fixed costs
In the long run in perfect competition:
a) Price = average cost = marginal cost
b) Price = average cost = total cost
c) Price = marginal revenue = total cost
d) Total revenue = total variable cost
For a perfectly competitive firm:
a) Price equals marginal revenue
b) Price is greater than marginal revenue
c) Price equals total revenue
d) Price equals total cost
Unit 12
Top of Form
Question 1
X inefficiency occurs when:
a) The price is greater than the marginal cost
b) The price is greater than the average cost
c) Costs are higher than they could be due to a lack of competitive pressure
d) There are external costs
Question 2
The marginal revenue curve in monopoly:
a) Equals the demand curve
b) Is parallel with the demand curve
c) Lies below and converges with the demand curve
d) Lies below and diverges from the demand curve
Question 3
In monopoly when abnormal profits are made:
a) The price set is greater than the marginal cost
b) The price is less than the average cost
c) The average revenue equals the marginal cost
d) Revenue equals total cost
Question 4
In monopoly in long run equilibrium:
a) The firm is productively efficient
b) The firm is allocatively inefficient
c) The firm produces where marginal cost is less than marginal revenue
d) The firm produces at the socially optimal level
Question 5
Barriers to entry do not include
a) Patents
b) Internal economies of scale
c) Mobility of resources
d) High investment costs
Question 6
In a monopoly which of the following is not true?
a) Products are differentiated
b) There is freedom of entry and exit into the industry in the long run
c) The firm is a price taker
d) There is one main seller
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Question 7
In monopoly which of the following is true?
a) There are many buyers and sellers
b) There is one main buyer
c) There is one main seller
d) The actions of one firm do not affect the market price and quantity
Question 8
According to Schumpeter:
a) Monopolies are inefficient
b) Monopoly profits act as an incentive for innovation
c) Monopolies are alocatively efficient
d) Monopolies are productively efficient
Question 9
A welfare loss occurs in monopoly where:
a) The price is greater than the marginal cost
b) The price is greater than the marginal benefit
c) The price is greater than the average revenue
d) The price is greater than the marginal revenue
Question 10
In the UK the government:
a) Bans monopolies
b) Fines all monopolies
c) Prevents firms acquiring more than 25% of the market
d) Has the right to investigate monopolies and will assess each one on its own merits
Unit 13
Top of Form
Question 1
If a few firms dominate an industry the market is known as:
a) Monopolistic competition
b) Competitively monopolistic
c) Duopoly
d) Oligopoly
Question 2
In a cartel member firms may be given a fixed amount to produce. This is called a:
a) Limit
b) Factor
c) Quota
d) Quotient
Question 3
In the Kinked Demand Curve theory it is assumed that:
a) An increase in price by the firm is not followed by others
b) An increase in price by the firm is followed by others
c) A decrease in price by the firm is followed by others
d) Firms collude to fix the price
Question 4
The Kinked Demand Curve theory assumes:
a) Firms cooperate
b) Firms act as part of a cartel
c) Firms are competitive
d) Firms are not profit maximisers
Question 5
In Game Theory:
a) Firms are assumed to act independently
b) Firms are assumed to cooperate with each other
c) Firms collude as part of a cartel
d) Firms consider the actions of others before deciding what to do
Question 6
In the kinked demand curve theory:
a) There is a kink in the marginal cost curve
b) Demand is price inelastic
c) Demand is price elastic
d) Non price competition is likely
Question 7
Firms in oligopoly are likely to:
a) Invest heavily in branding
b) Act independently of other firms
c) Try to differentiate its products
d) Try to be a price maker
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Question 8
A model of Game Theory of oligopoly is known as the:
a) Prisoner's Dilemma
b) Monopoly Cell
c) Jailhouse Sentence
d) Jury Box
Question 9
In cartels:
a) Each individual firm profit maximises
b) There may be an incentive to cheat
c) The industry as a whole is loss making
d) There is no need to police agreements
Question 10
In a cartel:
a) Firms compete against each other
b) Price wars are common
c) Firms use price to win market share from competitors
d) Firms collude
Unit 14
Instructions
Top of Form
Question 1
In monopolistic competition:
a) Firms face a perfectly elastic demand curve
b) All products are homogeneous
c) Firms make normal profits in the long run
d) There are barriers to entry to prevent entry
Question 2
In monopolistic competition:
a) Demand is perfectly elastic
b) Products are homogeneous
c) Marginal revenue = price
d) The marginal revenue is below the demand curve and diverges
Question 3
In monopolistic competition firms profit maximise where:
a) Marginal revenue = Average revenue
b) Marginal revenue = Marginal cost
c) Marginal revenue = Average cost
d) Marginal revenue = Total cost
Question 4
Which of the following is not one of the four Ps in marketing?
a) Product
b) Price
c) Place
d) Presence
Question 5
Effective branding will tend to make:
a) Demand more price inelastic
b) Supply more price inelastic
c) Demand more income elastic
d) Supply more income elastic
Question 6
In monopolistic competition if firms are making abnormal profit other firms will enter and:
a) The marginal cost will shift outwards
b) The demand curve will shift inwards
c) The average cost will shift downwards
d) The average variable cost will increase
Question 7
In Porter's five forces model conditions are more favourable for firms within an industry if:
a) Buyer power is high
b) Supplier power is high
c) Entry threat is low
d) Substitute threat is high
Question 8
If a firm takes over a competitor then, according to Porter's 5 forces model,:
a) Buyer power is higher
b) Supplier power is higher
c) Substitute threat is higher
d) Rivalry is lower
Question 9
In marketing "USP" stands for:
a) Unique Selling Proposition
b) Underlying Sales Pitch
c) Unit Sales Point
d) Under Sales Procedure
Question 10
In monopolistic competition:
a) There are few sellers
b) There are few buyers
c) There is one seller
d) There are many sellers
Unit 15
Top of Form
Question 1
Barriers to entry:
a) Do not exist in monopoly
b) Cannot exist in oligopoly
c) Do not exist in monopolistic competition
d) Do exist in perfect competition
Question 2
Which best describes price discrimination?
a) Charging different prices for different products
b) Charging the same prices for different products
c) Charging the same prices for the same products
d) Charging different prices for the same products
Question 3
For a firm operating in two markets and price discriminating the profit maximising condition is:
a) Marginal revenue in A = Price B
b) Marginal revenue in A = Marginal revenue B = Price A = Price B
c) Marginal revenue in A = Marginal revenue B = Marginal cost
d) Marginal revenue in A = Marginal revenue B = Average cost
Question 4
If the price elasticity of demand for a product in market A is -0.2 and in market B is -3 a price discriminator will charge:
a) The higher price in market A
b) The higher price in market B
c) The same price in both markets
d) Cannot tell which price will be higher
Question 5
In perfect price discrimination:
a) Consumer surplus is maximised
b) Produce surplus is zero
c) Community surplus is maximised
d) Consumer surplus is zero
Question 6
A benefit to consumers of price discrimination is that:
a) Some products are produced that would not otherwise be produced
b) Producer surplus increases
c) Consumer surplus decreases
d) Firms' profits increase
Question 7
In perfect price discrimination:
a) The demand curve is the marginal cost curve
b) The average revenue equals the average cost
c) The marginal cost is the average cost curve
d) The demand curve is the marginal revenue
Question 8
In price discrimination abnormal profits are made if:
a) Average revenue is greater than average variable cost
b) Average revenue is greater than average cost
c) Average revenue is greater than marginal revenue
d) Average revenue is greater than average fixed cost
Question 9
Barriers to entry:
a) Enable abnormal profits to be made in the long run
b) Enable losses to be made in the long run
c) Enable abnormal profits to be made in the short run only
d) Occur in perfect competition
Question 10
If the price elasticity is -0.3 this means:
a) Demand is upward sloping
b) Demand is price elastic
c) A price fall would increase revenue
d) Demand is price inelastic
Unit 16Top of Form
Question 1
If one car company takes over another car company this is an example of which type of integration?
a) Vertical
b) Horizontal
c) Conglomerate
d) Literal
Question 2
If a car company takes over a clothes business this is an example of which type of integration?
a) Vertical
b) Horizontal
c) Conglomerate
d) Literal
Question 3
Horizontal integration may lead to internal economies of scale. Which of the following is not a type of internal economy of scale?
a) Purchasing
b) Technical
c) Financial
d) Safety
Question 4
Acquisition and merger are examples of:
a) Internal growth
b) External growth
c) Organic growth
d) Underlying growth
Question 5
Unfair competition does not include:
a) Price cutting
b) Predatory pricing
c) Cartels
d) Price fixing
Question 6
If firms join together to set prices and quantities this is known as what?
a) Interaction
b) Conglomerate
c) Collusion
d) Integration
Question 7
In the Ansoff matrix a strategy focusing on new products and new markets is known as:
a) New product development
b) Diversification
c) Market development
d) Market penetration
A monopoly in the UK can be investigated if it has a market share of:
a) 100%
b) 10% or over
c) 25% or over
d) 33% or over
Question 9
Anti-competitive behaviour in the UK can lead to fines of up to:
a) 10% of profits
b) 10% of turnover
c) 10% of costs
d) 25% of market share
Question 10
An example of backward vertical integration is:
a) A supermarket buying a farm
b) A supermarket buying another supermarket
c) A supermarket buying an insurance company
d) A supermarket buying a car rental business
Unit 17
Top of Form
Question 1
To maximise sales revenue a firm should produce where:
a) Marginal cost is zero
b) Marginal revenue is maximised
c) Marginal revenue is zero
d) Marginal revenue equals marginal cost
Question 2
To maximise growth without making a loss a firm should produce the highest output where:
a) Average revenue equals marginal cost
b) Average revenue equals average cost
c) Marginal revenue equals marginal cost
d) Average cost equals marginal cost
Question 3
Profit is measured by:
a) Revenue - fixed costs
b) Fixed cost + revenue
c) Revenue - sales
d) Revenue - total costs
Question 4
When marginal revenue equals marginal cost:
a) Total revenue equals total cost
b) There is the biggest positive difference between total revenue and total cost
c) There is the biggest negative difference between total revenue and total cost
d) Profits are zero
Question 5
To be allocatively efficient a firm must produce where:
a) The total cost equals demand
b) The average revenue equals the marginal revenue
c) The price equals the average cost
d) The price equals the marginal cost
Question 6
To be productively efficient a firm must produce where:
a) Marginal costs are maximised
b) Marginal costs are minimised
c) Average costs are minimised
d) Average revenue is maximised
Question 7
Normal profit occurs when:
a) Average revenue equals average variable cost
b) Marginal revenue equals marginal cost
c) Average revenue equals marginal cost
d) Average revenue equals average cost
Question 8
If the marginal revenue is positive:
a) Selling another unit will increase total revenue
b) Selling another unit will increase profits
c) Selling another unit will increase costs
d) Selling another unit will increase average revenue
Question 9
Companies in the private sector are owned by:
a) The government
b) Shareholders
c) Employees
d) The community
Question 10
An independent assessment of the impact of firm's activities on society is called a:
a) Financial audit
b) Balance sheet
c) Profit and loss account
d) Social audit
Unit 18
Top of Form
Question 1
An increase in the wage rate:
a) Will usually lead to more people employed
b) Will decrease total earnings if the demand for labour is wage elastic
c) Is illegal in a free market
d) Will cause a shift in the demand for labour
Question 2
The Marginal Revenue Product is likely to be wage inelastic if:
a) Labour costs are a high percentage of total costs
b) Demand for the final product is price inelastic
c) It is relatively easy to substitute capital for labour
d) There are many substitutes for the final product
Question 3
A fall in demand for labour is likely to lead to:
a) A lower equilibrium wage and lower quantity of labour
b) A lower equilibrium wage and higher quantity of labour
c) A higher equilibrium wage and higher quantity of labour
d) A higher equilibrium wage and lower quantity of labour
Question 4
A decrease in the supply of labour is likely to lead to:
a) A lower equilibrium wage and lower quantity of labour
b) A lower equilibrium wage and higher quantity of labour
c) A higher equilibrium wage and higher quantity of labour
d) A higher equilibrium wage and lower quantity of labour
Question 5
The Marginal Revenue Product is:
a) Upward sloping due to the law of demand
b) Upward sloping due to the law of marginal utility
c) Downward sloping due to the law of diminishing returns
d) Downward sloping due to the law of supply
Question 6
Demand for labour is more likely to be wage inelastic if:
a) Wages are a small proportion of total costs
b) Demand for the final product is price elastic
c) It is easy to replace labour
d) Capital is a good substitute for labour
Question 7
A profit maximising firm will employ labour up to the point where:
a) Marginal revenue = marginal product
b) Marginal cost = marginal product
c) Marginal revenue product = average cost of labour
d) Marginal revenue product = marginal cost of labour
Question 8
In a perfectly competitive labour market firms are wage takers and the marginal cost of labour equals:
a) The average cost of labour
b) The marginal product
c) The marginal revenue
d) The total cost of labour
Question 9
If employees cannot accept a job because of the costs of moving this is known as:
a) Occupational immobility
b) Cyclical unemployment
c) Structural immobility
d) Geographical immobility
Question 10
If the minimum wage is set above the equilibrium wage rate, then other things unchanged:
a) There will be equilibrium in the labour market
b) There will excess demand in the labour market
c) There will be excess supply in the labour market
d) More people will be employed
Unit 19
Top of Form
Question 1
Which of the following is a macroeconomic issue?
a) The price of houses in Oxford
b) The wage rate for plumbers in London
c) Your decision to work or stay at home
d) The level of unemployment in the UK
Question 2
What is meant by an objective?
a) A policy
b) A way of reaching a target
c) A target
d) A strategy
Question 3
Which of the following is not involved with fiscal policy?
a) Income tax
b) National insurance
c) VAT
d) Interest rates
Question 4
Which does the government not control directly?
a) Spending on health
b) Spending on defence
c) Firms' investment decisions
d) Spending on education
Question 5
Which of the following is not a macroeconomic issue?
a) Unemployment
b) Inflation
c) The wages paid to footballers
d) Economic growth
Question 6
Which of the following can the government not use directly to control the economy?
a) Pay rates within the private sector
b) Pay rates in the public sector
c) Investment in education
d) Benefits available for the unemployed and sick
Question 7
Which of the following is a policy instrument as opposed to a government objective?
a) Lower interest rates
b) A better balance of trade position
c) Faster economic growth
d) Lower unemployment
Question 8
Which of the following is a possible government objective as opposed to a policy?
a) Lower interest rates
b) Lower taxation rates
c) Lower government spending
d) Lower inflation
Question 9
Which of the following is not likely to be a government objective?
a) Increasing employment
b) Increasing economic growth
c) Increasing government spending
d) Increasing the level of exports
Question 10
"Reducing inflation is a more important objective than economic growth" is an example of:
a) Normative economics
b) Positive economics
c) Objective economics
d) Reality economics
Bottom of Form
Bottom of Form
Unit 20
Top of Form
Question 1
a) Decrease aggregate demand
b) Always equal savings
c) Always equal national income
d) Include investment and export spending
Question 2
An increase in national income is:
a) Likely to increase exports
b) Likely to decrease savings
c) Likely to decrease investment
d) Likely to increase spending on imports
Question 3
An increase in national income is likely to:
a) Decrease tax receipts
b) Worsen the balance of trade
c) Automatically cause an increase in government spending
d) Cause an increase in injections into the economy
Question 4
A significant increase in the government budget deficit is likely to:
a) Reduce injections into the economy
b) Reduce national income
c) Move the economy away from full employment
d) Boost aggregate demand
Question 5
If injections are greater than withdrawals:
a) National income will increase
b) National income will decrease
c) National income will stay in equilibrium
d) Prices will fall
Question 6
Injections are:
a) Assumed to be exogeneous
b) Assumed to be a function of national income
c) Decrease aggregate demand
d) Decrease the investment into an economy
Question 7
For equilibrium in an open four sector economy:
a) Actual injections = actual withdrawals
b) Planned injections = planned withdrawals
c) Savings = investment
d) Government spending = tax revenue
Question 8
A deflationary policy could include:
a) Increasing injections
b) Reducing taxation rates
c) Reducing interest rates
d) Reducing government spending
Question 9
A reflationary policy:
a) Increases aggregate supply
b) Increases aggregate demand
c) Decreases the price level
d) Increases full employment
Question 10
Which of the following is an injection into the economy?
a) Investment
b) Savings
c) Taxation
d) Import spending
