Question 1

All the following statements about small firms are correct except one. Which statement is incorrect?

Options :

A : Small firms do not generally raise finance on the capital market

B : Banks may refuse to lend to small firms because of the risk involved

C : Small firms are common in industries which display increasing returns to scale

D : Small firms are common in industries where there are niche markets

Answer: D

Question 2

Globalization will have all the following effects on businesses except one. Which ONE is the exception?

Options :

A : Access to cheaper sources of supply in emerging economies

B : Increased competition on world markets for manufactured goods

C : Decreased international transportation and communications costs

D : The ability to shift production to low cost locations

Answer: C

Question 3

All of the following would lead to fall in the circular flow of national income except which one ?

Options :

A : A fall in business investment

B : A fall in personal savings rates

C : A reduction in the level of government expenditure

D : A rise in the marginal propensity to save

Answer: D

Question 4

Which one of the following policies to correct a balance of payments current account deficit is an example of an expenditure reducing policy?

Options :

A : Depreciation of the currency.

B : The imposition of an import tax.

C : Increased income tax.

D : The use of import quotas.

Answer: C

Question 5

ToyTown, a soft toy manufacturer, produces what it claims to be the cheapest teddy bears on the market. The graph shows the current price of a ToyTown teddy bear and its relationship to the demand for ToyTown teddy

bears.

If the price of ToyTown teddy bears were to increase, what would happen to the demand?

Options :

A : Demand would fall as consumers would look for alternative teddy bears to buy

B : Demand would increase because the teddy bears would be seen as more prestigious by consumers due to their higher prices

C : Demand would fall as the relationship between price and demand as shown in the graph is inelastic

D : Demand would increase as the relationship between price and demand as shown in the graph is elastic

Answer: A

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