EDEXCEL A-LEVEL ECONOMICS THEME 3
EXAM QUESTIONS AND ANSWERS 100%
CORRECT!
, Firm - ANSWER An organisation that brings together factors of production in order to
produce output.
Reasons Firms Grow - ANSWER 1. Increase market share.
2. Increase economies of scale.
3. Gain power.
Reasons Firms Remain Small - ANSWER 1. Legal barriers.
2. Overt barriers
3. High sunk costs.
4. Niche-market business.
5. Lack of expertise.
6. Optimum efficiency achieved.
Barriers to Entry - ANSWER Obstacles that ensure the continued existence of
monopoly power of firms in a market.
Predatory Pricing - ANSWER Pricing below costs to drive out other firms.
Limit Pricing - ANSWER Pricing low enough to discourage entry ofnew firms.
Destroyer Pricing - ANSWER Charging a deliberately low price to try to undermine
competitors and put them out of business.
Organic Growth - ANSWER Firms growing by being sucessful and reinvesting profits to
expand.
Horizontal Merger - ANSWER Merger between firms in the same industry.
Vertical Merger - ANSWER merger between firms in the same industry but at different
stages of production.
Conglomerate Merger - ANSWER Merger between firms in completely different
industries.
Synergy - ANSWER Two companies coming together to be better together.
Demerger - ANSWER When a firm splits into two or more independent businesses.
Variable Costs - ANSWER Do change according to number of units sold.
EXAM QUESTIONS AND ANSWERS 100%
CORRECT!
, Firm - ANSWER An organisation that brings together factors of production in order to
produce output.
Reasons Firms Grow - ANSWER 1. Increase market share.
2. Increase economies of scale.
3. Gain power.
Reasons Firms Remain Small - ANSWER 1. Legal barriers.
2. Overt barriers
3. High sunk costs.
4. Niche-market business.
5. Lack of expertise.
6. Optimum efficiency achieved.
Barriers to Entry - ANSWER Obstacles that ensure the continued existence of
monopoly power of firms in a market.
Predatory Pricing - ANSWER Pricing below costs to drive out other firms.
Limit Pricing - ANSWER Pricing low enough to discourage entry ofnew firms.
Destroyer Pricing - ANSWER Charging a deliberately low price to try to undermine
competitors and put them out of business.
Organic Growth - ANSWER Firms growing by being sucessful and reinvesting profits to
expand.
Horizontal Merger - ANSWER Merger between firms in the same industry.
Vertical Merger - ANSWER merger between firms in the same industry but at different
stages of production.
Conglomerate Merger - ANSWER Merger between firms in completely different
industries.
Synergy - ANSWER Two companies coming together to be better together.
Demerger - ANSWER When a firm splits into two or more independent businesses.
Variable Costs - ANSWER Do change according to number of units sold.
