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6. Normal profit is:

  • the amount of profit made in the last accounting period
  • the minimum amount of profit which is necessary to keep the firm in the industry
  • the amount a firm would like to make
  • the maximum amount of profit which the firm can make
  • the expected amount of profit that the firm should make

7. Costs and benefits which are outside the market system are known as:

  • externalities
  • public goods
  • merit goods
  • indivisibilities
  • imperfections

8. A firm will produce those goods which:

  • increase turnover
  • enable it to make the greatest return on capital
  • can be produced quickly
  • sell most
  • people need

9. The long run may be defined as:

  • none of the above
  • the period in which all factors of production are variable
  • a period when one factor of production is fixed
  • a period when all factors of production are fixed
  • any period longer than six months

10. In perfect competition firms:

  • have power but no interest in affecting the market price
  • can collude to affect the market price
  • have power to affect the market price
  • have no power to affect the market price
  • cannot leave the market

11. If an industry is characterised by a few very large firms and barriers to entry, then it is likely to have

  • none of the above
  • economies of scale and decreasing costs
  • normal profits
  • constant costs
  • perfect competition

12. In general, increased competition in an industry will tend to:

  • reduce advertising
  • increase profits
  • reduce prices
  • increase prices
  • none of the above

13. Which of the following is true of pure monopoly?

  • there are barriers to the entry of new firms
  • there are no barriers to the entry of new firms
  • none of the above
  • only normal profits are possible
  • there are many buyers and sellers

14. Characteristics of perfect competition include:

  • No barriers to entry or exit
  • Imperfect Knowledge
  • Few small firms
  • No profit maximisation
  • Government intervention

15. In November 2017, the Bank of England Base Rate was increased to:

  • 0.25%
  • 1%
  • 0.5%
  • 1.25%
  • 0.75%

16. Marginal cost may be defined as being the cost of producing:

  • one more (or less) unit of a commodity
  • the average number of units of a commodity
  • one unit of a commodity
  • the total number of units of a commodity
  • any unit of a commodity

17. In the property market:

  • the long run supply curves are more elastic than the short run supply curves
  • the long run and the short run supply curves have the same elasticity
  • no factors of production are variable in the short run
  • all factors of production are variable in the short run
  • the long run supply curves are less elastic than the short run supply curves

18. At the equilibrium price:

  • the quantity demanded is less than the quantity supplied
  • the quantity supplied will vary
  • the quantity demanded is greater than the quantity supplied
  • the quantity demanded is equal to the quantity supplied
  • the price does not remain constant in the short run

19. If the elasticity of supply is 2.5, when the price of a commodity rises by 1%, sellers:

  • increase supply by 2.5%
  • increase supply by 1%
  • do not change supply
  • decrease supply by 2.5%
  • decrease supply by 1%

20. Normally, firms aim to:

  • satisfy their workers
  • none of the above
  • produce as cheaply as possible
  • Maximise profits
  • produce as much as possible