1. The table shows details of mergers (purchases and sales) involving UK companies in 2015 and 2016.

2. What would explain an increase in the size of an industry and a fall in the average output of the
firms in an industry?
A an advance in communication methods which reduce coordination problems within firms
B an advance in technology which increases the cost advantage of capital-intensive methods
of production
C an increase in barriers to entry into the industry combined with an increase in barriers to exit
from the industry
D an increase in external economies of scale combined with a decrease in internal economies
of scale

3. Which characteristic would make it easier for firms in an industry to collude?
A a large number of firms
B homogenous products
C low barriers to entry
D rapid technological change

4. A fashion model is paid $500 000 a year.
If the next best paid job he could get is as a teacher at $100 000 a year, what are his transfer
earnings and his economic rent?

	Transfer earnings $	Economic rent $
A	zero	400000
B	100000	400000
C	400000	zero
D	400000	100000

5. Wages in industry X are significantly higher than in industry Y.
What could explain this difference?
A Workers in industry Y are highly mobile.
B Trade union organisation in industry Y is relatively strong.
C Industries X and Y compete with each other for workers.
D Industry Y has non-monetary advantages.

Answers