IGCSE Economics Paper-2: Specimen Questions with Answers 6 - 7 of 100

Passage

In an economy there are many large firms. But small firms remain small.

Question 6 (1 of 5 Based on Passage)

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Essay▾

Explain two reasons for the change in production from labor-intensive to capital-intensive.

Explanation

The reason for change in production from labor intensive to capital intensive is as follows:

  • A firm wants to benefit itself from the new and changed technology which lowers the cost of production of goods.
  • The labor available in the market does not possess the necessary skill require for the process of production.
  • In the market there is not enough supply of labor.
  • Too much chaos and disruption has been caused by the labor union strike and lockout.
  • Due to the changing price level in the economy the cost of labor in the market has also risen which leads to shift in production technique from labor intensive to capital intensive.

Question 7 (2 of 5 Based on Passage)

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Essay▾

Give two reasons why a private limited company is changed into a public limited company.

Explanation

Circumstances under which a private company is converted into a public limited company are as follows:

  • Conversion by default: A private company has limited number of members to 50 and the right to transfer shares is restricted it also does not offer an invitation to public subscription to its shares. If by chance any of these stated conditions of a company being a private company is violated a company becomes public company by default.
  • Conversion by operation of law: By the operation of law a private company can be converted into a public company if not less than 25 % of paid up share capital of a company is held by one or more public company or if the average turnover of a company for three consecutive years exceeds ₹ 25 crore, or when a private company holds not less than 25 % of paid up capital of public company, or if a private company invites accepts or renews deposit from the public then a private company by the operation of the law becomes a public company.

The other reason for conversion is a private company out of its own will choose to converts itself into a public company.

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