1. A kinked demand curve is often used when economists attempt to analyse the way in which
What does the kinked demand curve indicate?
A Oligopolists are unable to achieve profit maximisation.
B Satisficing is the best objective for firms that operate under conditions of oligopoly.
C There are always benefits available for oligopolists if they reduce price, but not if they
D There is a tendency towards price stability when firms operate under conditions of oligopoly.
2. Why might a firm adopt a policy of diversification?
A to achieve cost economies of scale
B to agree common prices with rivals
C to ensure greater ability to spread investment risks
D to increase productivity of labour
3. What would be likely to help a small firm to survive and what might be a threat to its survival?
|A||Contestability of the market||Expensive new technology|
|B||Customers valuing personal service||New government regulations on its business|
|C||Low barriers to entering its industry||Managerial diseconomies of scale|
|D||Selling a homogenous product||New firms entering the market|
4. The diagram shows the cost and revenue curves of a profit-maximising monopolist.
What measures the total monopoly profit made by the firm?
A JM B JK C JMOQ D JKOQ
5. The diagram shows a firm’s short-run total cost curve (TC).
Which statement is correct?
A Average total cost is minimised at output OQ2.
B Average variable cost is minimised at output OQ1.
C Average variable cost is minimised at output OQ3.
D Marginal cost is minimised at output OQ1.