economics paper 3

Question 1

What factors determine price elasticity of supply?

Answer 1

-Productivity
-Substitutes
-Stock
-Spare capacity
-Time lag

Question 2

What is the difference between internal and external growth?

Answer 2

Internal Growth:
expansion of a company’s operations from within, through the development of new products, services, or processes, and by increasing sales and market share.

External Growth:
expansion of a company through mergers, acquisitions, partnerships, or joint ventures with other companies. It involves gaining access to new markets, customers, or resources by partnering or acquiring other firms.

Question 3

What does MC stand for?

Answer 3

@TC/@Q

Question 4

What does ATC stand for?

Answer 4

AVC+AFC or TC/Q

Question 5

What costs occur in the short run?

Answer 5

Fixed and variable costs

Question 6

What costs occur in the long run?

Answer 6

Only variable costs

Question 7

What is the difference between fixed and variable costs?

Answer 7

Variable costs change with output, fixed costs do not

Question 8

What does TR stand for?

Answer 8

P*Q

Question 9

What does AR stand for?

Answer 9

P

Question 10

What does MR stand for?

Answer 10

@TR/@Q

Question 11

Why does PED change along the demand curve?

Answer 11

Because as price takes up more of income, demand becomes more inelastic

Question 12

Normal profit is…

Answer 12

AR=AC

Question 13

Subnormal profit is…

Answer 13

AR<AC

Question 14

Abnormal profit is…

Answer 14

AR>AC

Question 15

What are the 6 economies of scale?

Answer 15

I - Innovation, F - Financial, R - Risk bearing, A - Advertising, M - Managerial, P - Purchasing

Question 16

What does LRAC do for natural monopolies?

Answer 16

Always goes down

Question 17

What are some ways to increase LRAS?

Answer 17

• Investment in infrastructure
• Subsidies

LRAS stands for Long Run Aggregate Supply, which represents the total output of an economy when it is at full employment.