1. The economic concept of Sunk Cost reflects the:

a. The ex-ante economic costs of a decision.

b. The true accounting costs of future events that influence current economic profit.

c. Past economic costs that will affect future business decisions.

d. Costs that were incurred in the past and are no longer relevant to decision-making.

2. The condition for profit maximisation in the neoclassical model of the firm is:

a. Marginal revenue is equal to marginal cost.

b. Marginal revenue is equal to average cost.

c. The average cost is minimised.

d. The marginal cost is equal to the price.

3. If the consumers’ demand for a product is inelastic, this means that:

a. An increase in the price increases costs more than revenues.

b. A decrease in the price decreases revenues.

c. A decrease in the price increases profits.

d. An increase in the price increases revenues.

4. If a firm has benefit advantage, then:

a. It can charge a lower price than its competitors.

b. The difference in costs is higher than the difference in benefits between this firm and its competitors.

c. The firm creates more value than its competitors.

d. The firm generates higher consumer surplus than its competitors.

5. Which of the following is NOT an impediment to imitation:

a. Customer loyalty.

b. Expired patents.

c. Intangible barriers.

d. Ownership of inputs.

6. The key distinction between barriers to entry and impediments to imitation is:

a. They both include network effects as an instrument.

b. Barriers to entry are defenses against potential new competitors while impediments to imitation mainly target existing competitors.

c. Impediments to imitation include only legal instruments while barriers to entry can be either legal or economic instruments.

d. Barriers to entry are reactive measures while impediments to imitation are preemptive measures.

7. One of the costs of using the markets is:

a. The transaction costs involved in setting-up contracts.

b. The economies of scale of market firms.

c. The access of market firms to patents and copyrights.

d. The reputation disadvantage of collaborations.

8. “Creative destruction” is the process by which:

a. Old buildings are demolished and new ones are build in their place.

b. Old sources of competitive advantage are displaced by new ones.

c. Old skills become obsolete and new ones develop in their place.

d. Old technologies are replaced by new ones.