IGCSE Economics Paper-2: Specimen Questions with Answers 70 - 71 of 100

Passage

As a result of the government strategy, public sector had come to occupy a monopoly of dominant position in basic and heavy industries.

Question 70 (4 of 5 Based on Passage)

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Short Answer▾

Are private companies listed on the stock market?

Explanation

A firm held under the private ownership is referred to as a private company. A private company can issue stock and may have shareholders but it is not supposed to list or trade its shares on public stock exchanges and is not offered for trade through initial public offerings (IPO) . Due to which a private company is not required to fulfill the requirements of the Securities Exchange Commission (SEC) . On the other hand, a public company is supposed to strict filling. The shares of private companies are less liquid and are difficult for valuation.

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Question 71 (5 of 5 Based on Passage)

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Short Answer▾

Explain the reason why some firms remain small.

Explanation

Reasons for Firms to Remain Small Are

  • Avoidance of diseconomies of scale: Growth may not be the sole objective of the firm. Growth has some negative impacts on a business. Example, when a business grows it is going to face communication problems due to the increase in the hierarchy of business structure and its span of control.
  • Operation in niche markets: Due to operation in the niche markets some business may not have enough demand for its products and services that they sell in market for the product to grow and earn profits.

  • Entry Barriers: Barriers to entry into the market may be difficult for the firms to expand and grow in the market. For example, large business dominates the market that has low cost of operation due to which they would not be able to offer competitive prices to enter the market.

  • Small selling point: Selling point of some business may be small. For example, a retail shop which is small may provide better services to customer than the big ones. Due to which they want to keep their size small.

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