REVIEW - FIRMS and How It Operates

What is a key characteristic of a partnership?

• Limited liability

• Profit sharing

• Listed on the stock-changes

• No legal identity

The main reason for the birth of firms is to produce goods and sevices.

• TRUE

• FALSE

What does it mean for a firm to have economies of scale?

• Increasing productions cosct as output decreases

• Reducing production costs as output increases

• Reducing production costs as output decreases

• Maintaining constant production costs as output increases

How can firms increase their competitiveness in the market?

• by reducing advertising efforts

• by increasing their prices significantly compared to competitors

• by improving their customer service and support systems

• by continuous innovation and improvements in their product line

Explain the concept of short-run cost using your own senteces!

Answer explanation

Short-run cost is the period over which a firm is free to vary its input of one factor of production (labor) but faces fixed inputs of the other factors

Which of the following best describes a sole proprietor?

• A business owned and run by one person

• A business owned and run by two or more people

• A business owned and run by shareholders

• A business owned and run by the government

The condition when the percentage of marginal costs rises as much as marginal revenue is the definition of....

• Diseconomies of scale

• Increasing return to scale

• Constant return to scale

• Decreasing return to scale

Unilever is a firm that is owned by shareholders. So, they should publish their annual accounts and reports to their shareholders periodically.
Based on that explanation, Unilever can be categorized as ...

• Private Joint-Stock

• Sole-Proprietor

• Public Joint-Stock

• Partnership

Answer explanation

Write your understanding about The Law of Diminishing Return (using your own sentences)!

Answer explanation

The Law of Diminishing Returns:
If the firm increases the amount of inputs of one factor production while holding inputs of the other factors fixed, eventually the firm will get diminishing marginal returns from the variable factor.

The production costs that describing the additional cost if the firm increases output by one unit is a definition of....

• Total Costs

• Marginal Costs

• Fixed Costs

• Average Costs