A normal rate of profit ?

A. Is the rate of return on investments over the interest rate on risk-free government bonds.
B. Is the rate that is just sufficient to keep owners or investors satisfied.
C. Is the difference between total revenue and total costs
D. Is zero in a perfectly competitive industry.

Market power is ?

A. A firm’s ability to monopolies a market completely.
B. A firm’s ability to raise price without losing all demand for its product
C. A firm’s ability to sell any amount of output it desires at the market-determined price.
D. A firm’s ability to charge any price it likes

If a firm has some degree of market power, then output price ?

A. No longer influences the amount demand of the firm’s product
B. Becomes a decision variable for the firm
C. Is guaranteed to be above a firm’s average cost.
D. Is determined by the actions of other firms in the industry

A firm will shut down in the short run if ?

A. Fixed costs exceed revenues.
B. It is suffering a loss.
C. Variable costs exceed revenues
D. Total costs exceed revenues

A firm in perfectly competitive industry is producing 50 units, its profit-maximising quantity. Industry price is £2 and total fixed costs and total variable cost are £25 and £40 respectively. The firm’s economic profit is ?

A. £35
B. £15
C. £30
D. £60

A graph showing all the combinations of capital and labor that can used to produce a given amount of output is ?

A. An indifference curves.
B. An isoquant.
C. An isocost line
D. A production functions

A graph showing all the combinations capital and labor available for a given total cost is the ?

A. Expenditure set
B. Isocost line.
C. Budget constraint
D. Isoquant

Diminishing marginal return implies ?

A. Decreasing average fixed costs.
B. Decreasing marginal costs.
C. Decreasing average variable costs.
D. Increasing marginal costs.

Suppose Handel’s Ice Cream experiences economies of scale up to a certain point and diseconomies of scale beyond that point. Its long-run average cost curve is most likely to be ?

A. Downward sloping to the right
B. U-shaped
C. Horizontal
D. Upward sloping to the right

A group of firms that gets together to make price and output decisions is called ?

A. A concentrated industry.
B. A cartel
C. Price leadership
D. An oligopoly.