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| 1 | |
The following is not a type of firm: |
| | A) | sole trader |
| | B) | ice-cream van |
| | C) | partnership |
| | D) | company |
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| 2 | |
Companies are run by shareholders and owned by the board of directors. |
| | A) | True |
| | B) | False |
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| 3 | |
The opportunity cost of being a student is ___________. |
| | A) | Course fees and rent |
| | B) | A loan from the bank |
| | C) | What the student could have earned in the best job available instead of studying plus course fees and other costs of being a student (e.g., books) |
| | D) | What the student will earn after graduation |
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| 4 | |
The distinguishing feature of private equity firms is that they |
| | A) | do not maximise profit. |
| | B) | do not have outside shareholders as public companies do. |
| | C) | are exceptionally well managed. |
| | D) | pay exceptionally high wages. |
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| 5 | |
A firm’s _________ is the net amount of money actually received during the period. |
| | A) | balance sheet |
| | B) | profit and loss account |
| | C) | cash flow |
| | D) | expenditure |
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| 6 | |
Depreciation is ____________________ during the period. |
| | A) | the fall in a company’s share price |
| | B) | the loss in value of a capital good |
| | C) | a company’s decline in sales |
| | D) | an increase in costs |
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| 7 | |
A firm’s net worth is the assets it owns minus the liabilities it owes. |
| | A) | True |
| | B) | False |
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| 8 | |
The increase in total cost when one more unit is produced is known as _______. |
| | A) | marginal cost |
| | B) | opportunity cost |
| | C) | limited cost |
| | D) | average cost |
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| 9 | |
Opportunity cost is the amount ____ by not using a resource (labour, capital) in its ____ alternative use. |
| | A) | lost, worst |
| | B) | lost, best |
| | C) | gained, worst |
| | D) | gained, best |
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| 10 | |
The true indicator of how a business is doing is _______. |
| | A) | its share price |
| | B) | Directors’ bonuses |
| | C) | Supernormal profit |
| | D) | The customer base |
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| 11 | |
Marginal revenue is the _________ when output is ____________. |
| | A) | change in average revenue, increased |
| | B) | change in total revenue, increased by one unit |
| | C) | change in average revenue, increased by one unit |
| | D) | change in total revenue, increased |
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| 12 | |
Profits are maximized when _________________ |
| | A) | costs are minimized |
| | B) | revenue is maximized |
| | C) | average cost is less than average revenue |
| | D) | marginal cost equals marginal revenue |
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| 13 | |
If a firm is producing a level of output where marginal cost is greater than marginal revenue, it should increase output to maximise profits |
| | A) | True |
| | B) | False |
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| 14 | |
If a firm’s wage costs increase this will cause __________ and ________. |
| | A) | marginal cost to increase, output to fall |
| | B) | marginal revenue to increase, output to fall |
| | C) | average revenue to increase, the firm will close |
| | D) | average cost will rise, output will increase |
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| 15 | |
An upward shift in marginal cost ________output and an upward shift in marginal revenue ________ output. |
| | A) | reduces, reduces |
| | B) | reduces, increases |
| | C) | increases, increases |
| | D) | increases, reduces |
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| 16 | |
A firm should close down if profits are zero. |
| | A) | True |
| | B) | False |
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| 17 | |
If both marginal cost and marginal revenue increase, a firm __________. |
| | A) | should increase output |
| | B) | should reduce output |
| | C) | may either increase or reduce output |
| | D) | should not change output |
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| 18 | |
Indicate below which is not a source of company finance: |
| | A) | borrowing from banks |
| | B) | corporate bonds |
| | C) | raffle tickets |
| | D) | stock market |
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| 19 | |
The principal-agent problem arises because of the separation of ownership and customers |
| | A) | True |
| | B) | False |
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| 20 | |
The optimal level of output is when ___________. |
| | A) | revenue is maximised |
| | B) | costs are minimised |
| | C) | total economic profits are maximized |
| | D) | a high share price is maintained |
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