Class notes
Theory of Firms Economics
- Course
- Institution
- Book
A summary of the theories of firms. Ranging from monopolies, perfectly competitive to small firms and the liquidy preference theory.
[Show more]Preview 2 out of 5 pages
Some examples from this set of practice questions
1.
Which of the following are advantages of starting a small firm? (a) Lending from financial institutions (b) Having government support (c) Less time commitment (d) Lower prices (Highly competitive)
Answer: (b). Having government support Reasons it\'s NOT: (a) Smaller firms tend to have a higher risk due to their unlimited liability. Thus, banks and other financial institutions would not have enough trust in their survival to allow them credit. (c) Having a smaller firm would require more personal time and attention as it usually does not have enough funds to hire workers, managers, etc. (d) Large firms have the benefits from Economies of Scale, something small firms do not. Economies of scale help these large firms reduce production costs.
2.
What is the 3rd degree of price discrimination? (a) A different group of consumers pay different prices (b) Each consumer pays maximum they are prepared to (c) Different prices for different quantities consumed
Answer: (a) A different group of consumers pay different prices Reasons why NOT: (b) 1st degree of price discrimination (c) 2nd degree of price discrimination
3.
Which is the right quality of an Oligopoly market? (a) Low barriers to entry (b) 1 seller (c) Normal profits in the long run (d) Limit pricing
Answer: (d) Limit pricing Reasons it\'s NOT: (a) In an oligopoly, there are a high barriers to enter (eg. high production costs) (b) In an oligopoly, there are a few large firms (c) In an oligopoly, firms earn abnormal profits in the long run
4.
What is X-inefficiency? (a) Production at MC=MR (b) Advertising, innovation, and sponsorships (c) Average costs are higher than they should be (d) When 1 firm changes its price, other firms will follow
Answer: (c) Average costs are higher than they should be Explanation: X-inefficiency happens in a monopoly market when there is a lack of competition resulting in it to act as a perfectly competitive market. Reasons why it\'s NOT: (a) MC=MR is the common point at which firms product (b) Types of non-price competition (d) Explanation of price leadership
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Stuvia is a marketplace, so you are not buying this document from us, but from seller adrianakk. Stuvia facilitates payment to the seller.
No, you only buy these notes for $7.49. You're not tied to anything after your purchase.
4.6 stars on Google & Trustpilot (+1000 reviews)
97969 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now