1. The diagram shows a firm’s total cost curve.
At which level of output will the firm’s marginal cost be equal to its average cost?

2. What is necessary for a firm to practise price discrimination?
A There are many buyers in the market.
B There are many firms in the market.
C The markets can be separated.
D The price elasticity of demand for the product is inelastic.

3. A mobile (cell) telephone manufacturing company takes over an electronic chip design company.
This is an example of which type of growth?
A horizontal
B lateral
C vertical backwards
D vertical forwards

4. An imperfectly competitive firm was making supernormal profits. The following year it made
normal profit with no change in output.
How could this situation be shown on a diagram for an imperfectly competitive firm?
A by a movement to the left of the average revenue curve
B by a movement to the right of the marginal revenue curve
C by a shift to the right of the marginal cost curve
D by an upward shift in the average cost curve

5. What is implied by an observation that an industry is contestable?
A Barriers to entry make little difference to a firm’s monopoly power.
B Firms in the industry can earn abnormal profits in the long run.
C Inefficient firms can survive in the industry in the long run.
D Monopoly power is not necessarily exploited.

Answers