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Economics multiple choice questions

GCSE and O level

Different Types and Sizes of Firms

Multiple Choice Questions and Answers

MCQ Questions:

1. In August 2008, Infosys, an Indian information technology company, bought Axon, a UK information technology company. Which type of integration is this?
A) Conglomerate
B) Horizontal
C) Vertical backward
D) Vertical forward

2. Which type of business organization has its shares quoted on a stock exchange?
A) Co-operative
B) Private company
C) Public company
D) Public corporation

3. Mr. Jones runs a small shop selling household appliances. His total revenue has declined due to the opening of a large supermarket which sells a similar range of goods. How could Mr. Jones compete with the supermarket?
A) Develop financial economies of scale
B) Engage in a price-cutting war
C) Introduce a massive advertising campaign
D) Provide personal after-sales service

4. General Motors, a large multi-national company based in the United States, sold some of its European car assembly plants to other car manufacturers during the world recession (economic downturn) in 2009. Which economic reason would have been most likely to influence this decision?
A) To benefit from horizontal integration of manufacturing
B) To diversify and expand its product range
C) To encourage vertical integration of sales and production
D) To reduce its excess capacity in car production

5. Which is a diseconomy of scale?
A) Bulk buying reduces costs
B) Communications deteriorate
C) Employees are more motivated
D) Technological improvements take place

6. Domino's, the largest US pizza chain, decided also to sell sandwiches in an attempt to increase its revenue. Which term describes this change?
A) Amalgamation
B) Diversification
C) Externalities
D) Vertical integration

7. Which of these statements made by an Economics student about different types of business organization is true?
A) Partnerships face problems in raising large sums of finance
B) Private companies cannot have limited liability
C) Public companies operate in the public sector of the economy
D) Public corporations operate in the private sector of the economy

8. In January 2008, ICI, a major UK chemical firm, was bought by its rival, a Dutch chemical firm. What definitely occurred when the Dutch firm bought ICI?
A) A partnership
B) Economies of scale
C) Horizontal integration
D) An increased profit

9. To achieve horizontal integration, a firm producing tires could merge with another firm producing:
A) Motor cars
B) Rubber
C) Tire-producing machinery
D) Tires

10. Which is an internal diseconomy of scale?
A) A lack of communication in a firm
B) A reduction of cost by buying in bulk
C) A shortage of skilled labor in an area
D) Traffic congestion in a particular area

MCQ Answers:

1. B) Horizontal
2. C) Public company
3. D) Provide personal after-sales service
4. B) To diversify and expand its product range
5. B) Communications deteriorate
6. B) Diversification
7. A) Partnerships face problems in raising large sums of finance
8. C) Horizontal integration
9. D) Tires
10. A) A lack of communication in a firm

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