Notes de cours
Theory of Firms Economics
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A summary of the theories of firms. Ranging from monopolies, perfectly competitive to small firms and the liquidy preference theory.
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Quelques exemples de cette série de questions pratiques
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)
Réponse: (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
Réponse: (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
Réponse: (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
Réponse: (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
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