IAL Econ Unit 3 Revision 4

The diagram shows a short-run marginal cost curve for a small café in Thailand.

Which one of the following is the reason why the MC curve slopes upwards from

point X to point Y?

• Decreasing returns to scale

• Increasing fixed costs

• Diminishing returns

• Diseconomies of scale

The output of a textile manufacturer based in Botswana is 30 000 units of clothing

per month. The firm’s total revenue is $78 000, its total costs are $57 800 and its total

fixed costs are $30 800 per month.

Which one of the following is the firm’s average variable cost at this level of output?

• $0.90

• $1.03

• $1.93

• $2.60

A survey conducted in 2021 found that 76% of US companies with factories in China

were in the process of moving operations to other countries in southeast Asia. This

would cause thousands of manufacturing workers in China to lose their jobs.

Which one of the following government measures is most likely to increase the

occupational mobility of labour?

• An increase in unemployment benefits

• An increase in relocation grants for businesses

• An increase in training schemes

• An increase in the national minimum wage

The diagram shows the short-run cost and revenue curves for a profit maximising

street food business in Sri Lanka.

Which one of the following can be deduced from this diagram?

• The firm is dynamically efficient

• The firm is making normal profit

• The firm operates in a perfectly competitive market

• The firm will shut-down in the short-run

A monopolist changes its objective from profit maximisation to sales volume

maximisation.

Which one of the following is the most likely impact of this decision?

• A fall in the number of workers employed by the firm

• An increase in the price of the good

• A fall in the firm’s total fixed costs

• An increase in the firm’s output

The elasticity of demand for agricultural workers in South Africa is estimated to

be –0.3.

Which one of the following is the most likely reason for this value of the elasticity of

demand for labour?

• Labour cannot be easily replaced by capital

• Wage rates are relatively high in the agricultural industry

• Consumer demand for the final product is price elastic

• Productivity is relatively low in the agricultural industry