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CIMA BA1 - Fundamentals of Business Economics

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Page: 8 / 14
Total 468 questions

Porter describes differentiation as a firm having a unique product or service that is valued by the customer. Which ONE of the following is NOT a factor in the higher prices and profits from differentiated products?

A.

Lower price elasticity of demand due to the product having few substitutes

B.

Price inelastic supply because differentiation acts as a barrier to entry against other firms

C.

Higher customer satisfaction making them willing to pay a higher price

D.

Higher costs of production and marketing necessitating the charging of a higher price

A firm will maximize profits by producing at that level of output where

A.

average total cost is at a minimum

B.

average revenue is at a maximum

C.

the difference between total costs and total revenue is greatest

D.

the difference between average revenue and average variable cost is greatest

For a business, diseconomies of scale occur when

A.

the gains from the division of labor are exhausted

B.

all available economies of scale have been exhausted

C.

the market for the firm's product becomes saturated

D.

difficulties in managing a large firm lead to rising long run average costs

Which of the following provides a definition of a free good?

A.

No charge is made for it by its supplier

B.

Its provision is financed by taxation

C.

It is produced from renewable resources

D.

It is available at zero cost of production in unlimited quantities

A shift in the supply curve for a good will have the biggest effect on the market price when the demand curve for the good

A.

is highly price elastic

B.

is highly price inelastic

C.

has unit price elasticity

D.

is perfectly price elastic

Economies of scale can result from all the following except one. Which is the exception?

A.

An increase in the size of a firm's capacity and plant

B.

A bus company replacing smaller buses with larger buses

C.

A factory employing two shifts of workers rather than one shift per day

D.

Increased firm size allowing the firm to employ specialist managers

All of the following statements about a firms total revenue curve are true except which ONE?

A.

Because the price of a product falls as more is supplied to the market the curve is not a straight line

B.

Price elasticity of demand for the product = 1 at the highest point of the curve

C.

If price of the product rose the curve would pivot upwards

D.

The curve would be a horizontal straight line if demand for the product were perfectly price elastic

Whenever demand for a good is price elastic, an increase in price will

A.

Increase monopoly power

B.

Increase consumer expenditure on the good

C.

Increase consumer expenditure on a good in joint demand

D.

Decrease total consumer expenditure on the good

XYZ plc has relocated its head office to a new site which enjoys better road communications and is close to a training college that teaches the skills needed to work at XYZ plc. Why will XYZ's costs fall?

A.

It will gain the benefits of technical economies of scale

B.

It will gain the benefits of managerial economies of scale

C.

It will gain the benefits of external economies of scale

D.

It will gain the benefits of financial economies of scale

The main purpose of government competition policy is to

A.

Prevent mergers between large companies

B.

Restrict anti-competitive behavior by firms

C.

Limit the ability of firms to secure long run excess profits

D.

Enforce competition by breaking up large firms