3. Production, Costs and Revenue - Year 1

Which one of the following is most likely to discourage the growth of a firm? The existence of

• diseconomies of scale at low levels of output.

• large economies of scale at low levels of output.

• large economies of scale at low levels of output.

• competing firms in the same industry

A company wishes to increase labour productivity. All other things being equal, this is most likely to be achieved if the company

• employs more workers.

• reduces the wages it pays its employees.

• reduces current output.

• invests in more capital equipment.

All other things being equal, which one of the following is most likely to discourage the growth of a firm?

• Marketing economies of scale at high levels of output

• Low unit costs of production compared with competing firms

• An increase in market power at high levels of output

• Diseconomies of scale at low levels of output

Specialisation requires the existence of

• economies of scale.

• economic efficiency

• a system of exchange.

• rising productivity.

All other things being equal, which one of the following situations always results in a rise in labour productivity?

• Output falls at a slower rate than the fall in the number of workers employed

• Output falls at a faster rate than the fall in the number of workers employed

• Output rises at a slower rate than the rise in the number of workers employed

• Output always rises as the number of workers employed increases

• remains constant

• falls over the whole range

• rises at first and then falls.

• falls at first and then rises

• 3

• 5

• 7

• 63

• the total output of all workers was highest in 2012

• productivity changed at its fastest rate between 2008 and 2009.

• the numbers of workers employed was higher in 2012 than in 2010.

• the amount produced per worker rose fastest between 2011 and 2012.

In an economy, some industries are dominated by a few large firms. Which one of the following is most likely to explain this situation?

In the economy...

• small producers are likely to suffer from diseconomies of scale.

• as industries increase their output, firms are likely to be able to charge a higher price for their products.

• as firms increase their size, the employment of specialist managers may result in a fall in the average cost of running a business.

• small firms find it hard to compete because, as firms increase their output, the rise in employment is likely to reduce labour productivity.

Diseconomies of scale might arise because

• firms spend money on new technology which leads to lower average costs.

• decision-making by management becomes more difficult in larger firms.

• workers are more likely to be productively efficient in larger firms.

• larger firms can buy in bulk.