Chapter 22-23 CT Revision

Which conditions enable price discrimination?

1. 1. The firm can separate the total market into different sub-markets.

2. 2. There are different price elasticities of demand (PED) in each separate sub-market.

3. 3. The marginal revenue curve is the same in each separate market.

• 1 and 2 only

• 1 and 3 only

• 2 and 3 only

• 1 , 2 and 3

The diagram shows a firm producing at Q1 on short-run average cost SRAC1.

Which strategy will achieve the greatest reduction in average costs at this output?

• increasing its fixed factors of production only

• increasing its fixed and variable factors of production

• reducing its fixed factors of production only

• reducing its fixed and variable factors of production

Which change would make it easier for a cartel to operate effectively?

• an increase in competition from closely related industries

• an increase in the number of firms in the industry

• an increase in the range of products made by cartel members

• an increase in the stability of the market for its products

Some workers in a low-paid job decide to work longer hours to increase their disposable income. However, this decision reduces state-provided benefits, leaving them worse off.

What does this describe?

• A debt trap

• liquidity trap

• unemployment trap

• poverty trap

What indicates that nationalisation has taken place?

• a firm switches sales to the domestic market from the international market

• a firm restricts ownership of its shares to citizens of its own country

• a firm moves from private ownership to state ownership

• a firm buys supplies locally rather than from international sources

Too many flights in the airline industry cause unnecessary damage to the environment. Which measure is most likely to result in the socially optimal number of flights?

• a complete ban on flights removing all private and external costs

• greater deregulation of the global airline industry

• publishing information to highlight the negative effects of flying on the environment

• the payment of a subsidy per passenger equal to the difference between the private and social benefit

The table shows the estimated costs for operating a new factory at the end of its first year.

Assuming the short run is one year, what are the total variable costs?

• $ 1 m

• $ 6 m

• $ 10 m

• $ 30 m

A manufacturing company merged with two companies. One of these was company X that produced a substitute product. The other was company Y that supplied its raw materials.

Which combination shows the types of merger that the manufacturing company has undertaken?

• A

• B

• C

• D

The government wants to regulate the consumption of a demerit good in order to increase society’s net welfare.

In which situation will society’s net welfare increase

• The fall in the marginal social benefit is greater than the fall in the marginal social cost.

• The fall in the marginal external cost is greater than the fall in the marginal external benefit.

• The fall in the total social benefit is greater than the fall in the total social cost.

• The fall in the total social cost is greater than the fall in the total social benefit.

The marginal cost curve of a firm passes through the lowest point of the firm’s

• average fixed cost curve.

• average variable cost curve.

• marginal revenue curve.

• total cost curve.