9708A. 10 November

1. What are the correct formulae for calculating average cost (AC) and average revenue (AR)?

A\frac{TC}{MC} \frac{TR}{MR}
B\frac{TC}{P} P x Q
C\frac{TC}{Q} \frac{TR}{Q}
D\frac{TC}{Q} \frac{TR}{P}

Key: MC = Marginal Cost, MR = Marginal Revenue, P = Price, Q = Quantity, TC = Total Cost, TR = Total Revenue

2. What is always present in monopolistic competition and perfect competition in the long run?
A average revenue = average costs
B average revenue = marginal revenue
C average costs = marginal costs
D average costs = marginal revenue

3. A firm maximises its profits by maximising its total revenue.
What does this imply?
A Average fixed cost is zero.
B Average revenue is equal to average cost.
C Marginal cost is zero.
D Marginal revenue is greater than marginal cost.

4. What will happen to an industry’s supply curve if firms leave the industry?
A It will shift to the left at any given price.
B It will shift to the right at any given price.
C There will be a downward movement along the supply curve.
D There will be an upward movement along the supply curve.

5. Which characteristic of a market is a reason for a firm to remain small?
A The minimum efficient scale is high.
B The potential for x-inefficiency is high.
C There are significant economies of scale.
D There is limited access to financial capital.


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