IAL Eco Unit 3 Revision 7

In 2021, Koji Sato, the CEO of Toyota, stated that technical economies of scale were

one of the main reasons for the company’s success.

Which one of the following results from technical economies of scale?

• An increase in purchasing economies

• A decrease in advertising costs

• An increase in short‑run average costs

• A decrease in long‑run average costs

The table shows the costs for a small hairdressing business as it increases the number

of haircuts.

Which one of the following is the marginal cost of increasing the number of haircuts

from 2 to 3? You may use the blank column for your workings.

• $4.00

• $8.00

• $8.66

• $12.50

In 2022 the pharmaceutical company GlaxoSmithKline (GSK) demerged from the

consumer health business Haleon. GSK’s shareholders believed that the businesses

would be able to work more successfully as separate companies.

Which one of the following is the most likely reason why GSK decided to demerge

from Haleon?

• To benefit from external economies of scale

• To diversify the business

• To achieve diseconomies of scale

• To focus on its core business

The diagram shows the short‑run costs and revenues for a farmer producing wheat

in India.

Which one of the following is most likely to occur in the long‑run?

• Additional wheat farmers will enter the market

• Some wheat farmers will leave the market

• The wheat farmer will make supernormal profit

• The wheat farmer will make a loss

A profit maximising firm decides to change its objective to revenue maximisation.

Which one of the following combinations is the most likely impact of this decision?

• Supernormal profit No Change

  Price No Change

• Supernormal profit Increase

  Price Increase

• Supernormal profit Decrease

  Price Decrease

• Supernormal profit Increase

  Price No Change

A 2022 study found that the geographical mobility of labour in the USA has been

decreasing for the last 30 years.

Which one of the following is most likely to cause a decrease in the geographical

mobility of labour?

• An increase in the skills of the workforce

• An increase in relocation grants provided by the government

• An increase in average house prices and rents

• An increase in the availability of affordable housing