In the long run a firm may find its average cost of production rising because

of the effect of diseconomies of scale

of the operation of diminishing returns to a fixed factor

over time the price of purchased inputs rises

in the long run all costs are variable costs

If a government adopted an expansionary fiscal policy of cutting direct taxes, the businesses that would benefit most would be those whose products:

Are sold mainly to individual consumers

Have a high price elasticity of demand

If a central bank wished to increase the supply of money and credit in the economy it would:

buy bonds and reduce interest rates

sell bonds and raise interest rates

sell bonds and reduce interest rates

buy bonds and raise interest rates

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?

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

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

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

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

Free CIMA CIMAPRA17-BA1-1 Exam Practice Questions & Explanations

Last updated on: Sep 29, 2026
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