9708A. 8 November

1. In large cities there are streets where many sellers of similar hot foods compete for sales.
Which type of market structure does this represent?
A monopoly
B monopolistic competition
C oligopoly
D perfect competition

2. A firm always operates with economies of scale in the long run.
What is the shape of its long-run average cost curve?
A It is horizontal.
B It is ‘U’ shaped.
C It slopes downwards.
D It slopes upwards.

3. A multinational firm seeks to minimise costs and maximise profits.
What would least assist the multinational to achieve these objectives?
A achieving a near monopoly status to control outputs and prices
B locating the firm’s home base in a country with a low level of corporation tax
C operating as a member of a cartel with production quotas
D owning subsidiary firms in different countries to achieve economies of scale

4. What is the most likely combination of income elasticity of demand and price elasticity of demand that explains why a firm can make higher profits in specialised luxury product markets?

Income elasticity of demandPrice elasticity of demand

5. The diagram shows a firm’s cost and revenue curves:

The firm embarks on a single successful $100 million advertising campaign.
How will this affect its costs and revenue curves?

MR curveAR curveMC curveAC curve
AShifts to rightShifts to rightShifts upUnchanged
BShifts to rightShifts to rightUnchangedShifts up
CUnchangedUnchangedShifts upUncahnged
DUnchangedUnchangedUnchangedShifts up


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