Cambridge IGCSE · Economics (0455)

Firms: Practice Questions

5 multiple-choice questions marked as you go, and 5 written questions with worked solutions. All on Firms.

10 questions25 marksFree, no account

Question 1

1 mark

A manufacturing firm increases all its factors of production by \( 50\% \). As a result, its total output increases by \( 80\% \). Which economic concept does this change best describe?

Question 2

1 mark

A firm in a competitive market decides to prioritize survival as its main objective during an economic recession. What is this firm most likely to do?

Question 3

1 mark

What is the most likely primary objective of a newly established firm entering a highly competitive market with many well-known brands?

Question 4

1 mark

Which type of merger occurs when a car manufacturer merges with a company that provides car insurance services, where the two businesses are in different industries?

Question 5

1 mark

Which of the following is most likely to be an external economy of scale for a firm in the technology sector?

Question 6

2 marks

State two internal diseconomies of scale that a firm might experience as it grows too large.

Write your answer out first, then check it against the worked solution.

Question 7

3 marks

Explain one reason why a car manufacturer might engage in backward vertical integration.

Write your answer out first, then check it against the worked solution.

Question 8

5 marks

Explain how diseconomies of scale can result from communication problems in a large firm.

Write your answer out first, then check it against the worked solution.

Question 9

6 marks

A large textile firm operates in the secondary sector and is considering expanding its production capacity.

(a) Identify two characteristics that distinguish a firm in the secondary sector from a firm in the tertiary sector.
(b) State one advantage and one disadvantage for a firm that chooses to remain small.
(c) Define average total cost (ATC) and state the formula used to calculate it.

Write your answer out first, then check it against the worked solution.

Question 10

4 marks

Firms often seek to expand their operations through different methods of growth.

(a) Define internal growth and provide one example of how a firm might achieve it.
(b) Distinguish between a horizontal merger and a vertical merger.

Write your answer out first, then check it against the worked solution.

* The content provided by thinka is generated by AI and may not always be accurate or up-to-date. Please use it as a supplementary resource and verify with official materials.

You've seen the model answer. Now get yours marked.

This page can show you how a good answer looks. It cannot tell you what your answer was missing. thinka marks your written work against the real mark scheme in about 15 seconds.

Get My Answers Marked Back to the notes

Want more questions like these? Get a fresh set on this topic, marked as you go.