Theory of the Firm Quiz
Test your knowledge of The Theory of the Firm with these A-Level Economics questions.
This quiz consists of 20 questions. Scroll down to start the quiz!
Questions
If a firms demand curve slopes downwards, what would you expect to happen to its revenue?
Revenue would rise at a decreasing rate as production increases until marginal revenue is equal to zero.
When do diseconomies of scale come into effect?
When firms become too large or inefficient.
What are supernormal or abnormal profits?
Profits that exceed the normal amount and are maximised.
What types of companies earn supernormal profits?
Monopolies.
Describe the shape of the marginal revenue curve.
It slopes downwards.
How do you calculate total revenue?
Quantity sold x Average selling price.
How can economies of scale act as a barrier of entry to firms?
Economies of scale allow a business to have a lower cost structure and therefore they can charge lower prices when a new firm enters the market eventually forcing them to leave.
What is meant by the term minimum efficient scale?
Where an increase in the scale of production gives no benefits to a reduction in unit costs.
What are economies of scale?
As production increases average costs per unit decrease.
Who benefits from external economies of scale?
The whole industry.
What are marginal costs?
Marginal costs look at the amount each additional unit adds to total costs.
As output increases what happens to average fixed costs?
They decrease as they are divided by more units.
How are fixed costs illustrated graphically?
As a horizontal line.
What are semi variable costs?
Costs with a fixed and variable element.
According to the law of diminishing returns what happens to the productivity of extra workers over time?
It decreases.
What does divorce of ownership and control mean?
That the people who own the business are different to the people that run the business.
Express in terms of marginal costs and revenue the point of profit maximisation for the firm.
Where MC = MR.
"Profit is the key objective for most firms" To what extent do you agree with this statement? (30 marks)
Level 1 - Candidate identifies few issues. Doesn't apply economic concepts well. Lacks analysis and evaluation. Failure to link issues. Limited understanding of key terms. 0-6 marks
Level 2 - Candidate recognises a few issues and has a limited application of economic concepts. Basic links between issues. Basic understanding of key concepts and some understanding of relationships. 7-12 marks
Level 3 - Identifies a few issues. Applies economic concepts and ideas to the question. Limited evaluation. Links issues and concepts. Attempts to identify alternative points of view. 13-20 marks
Level 4 - Identify several issues. Interrelates economic issues. Talks in economic language and shows a good level of evaluation. Able to link issues and concepts. 21-26 marks
Level 5 - Shows extensive use of economic vocabulary and thought. Arguments are well formed and information is synthesised. Excellent evaluation of the question with thorough and valid arguments presented and analysed. 27-30 marks.
To what extent do you think the advantages associated with the growth of a firm always outweigh the disadvantages? (30 marks)
Level 1 - Candidate identifies few issues. Doesn't apply economic concepts well. Lacks analysis and evaluation. Failure to link issues. Limited understanding of key terms. 0-6 marks
Level 2 - Candidate recognises a few issues and has a limited application of economic concepts. Basic links between issues. Basic understanding of key concepts and some understanding of relationships. 7-12 marks
Level 3 - Identifies a few issues. Applies economic concepts and ideas to the question. Limited evaluation. Links issues and concepts. Attempts to identify alternative points of view. 13-20 marks
Level 4 - Identify several issues. Interrelates economic issues. Talks in economic language and shows a good level of evaluation. Able to link issues and concepts. 21-26 marks
Level 5 - Shows extensive use of economic vocabulary and thought. Arguments are well formed and information is synthesised. Excellent evaluation of the question with thorough and valid arguments presented and analysed. 27-30 marks.
Analyse the different functions of profit within the economy. (30 marks)
Level 1 - Candidate identifies few issues. Doesn't apply economic concepts well. Lacks analysis and evaluation. Failure to link issues. Limited understanding of key terms. 0-6 marks
Level 2 - Candidate recognises a few issues and has a limited application of economic concepts. Basic links between issues. Basic understanding of key concepts and some understanding of relationships. 7-12 marks
Level 3 - Identifies a few issues. Applies economic concepts and ideas to the question. Limited evaluation. Links issues and concepts. Attempts to identify alternative points of view. 13-20 marks
Level 4 - Identify several issues. Interrelates economic issues. Talks in economic language and shows a good level of evaluation. Able to link issues and concepts. 21-26 marks
Level 5 - Shows extensive use of economic vocabulary and thought. Arguments are well formed and information is synthesised. Excellent evaluation of the question with thorough and valid arguments presented and analysed. 27-30 marks.
Category
