1.2 Business Economics

Question 1

What is a monopoly

Answer 1

A monopoly is a situation where there is one dominant seller in the market

Question 2

what is a natural monopoly

Answer 2

A natural monopoly is a situation that occurs when one firm is able to server the industry at a lower cost than lots of small firms

Question 3

What are the features of a monopoly

Answer 3

Price makers
Niche product
High barriers to entry
One firm dominates the market

Question 4

what are the advantages of a monopoly and expand where necessary

Answer 4

• Innovation - lots of money going into one firm means lots can go into innovation
• Economies of scale
• Efficiency - with multiple firms, there can be wasteful duplications of resources

Question 5

what are the disadvantages of a monopoly

Answer 5

• restricted choice for consumer - leads to higher pices and potential exploitation for consumer
• Inefficiency - no incentives to keep costs down
• lack of innovation - no incentives

Question 6

What is a barrier to entry?

Answer 6

obstacles at discourage a firm from entering the market

Question 7

list some barriers to entry

Answer 7

• patents
• legal barriers - government contracts with monopolies
• technology
• high start-up costs
• high marketing budjet

Question 8

What are factors influence firm growth

Answer 8

• Economies of scale
• reducing risk - if a business has multiple shops it wont destroy the business if one goes down
• desire to take over competitors
• already have acess to large amounts of finance

Question 9

What are factors that influence firms to stay small

Answer 9

• diseconomies of scale
• aims of the entrepreneur
• government regulations - government doesn’t want the chance of a monopoly
• size of the market - no need to expand in a very luxurious market where there will always be limited demand

Question 10

what are some advantages of small firms and expand where necessary

Answer 10

• Flexibility - easier to make changes
• lower wage costs - workers in small firms most likely aren’t in trade unions and can’t negotiate wage as much
• better communication
• personals services

Question 11

what are some disadvantages of small firms and expand where necessary

Answer 11

• cannot exploit economies of scale - higher costs
• difficulty attracting quality staff
• vulnerability

Question 12

what are some advantages of large firms and expand where necessary

Answer 12

• Economies of scale
• Market domination - leads to higher profile in public eye
• less vulnerability

Question 13

What are some disadvantages of large firms and expand where neccessary

Answer 13

FINISH

Question 14

What is economies of scale

Answer 14

Economies of scale are the cost advantages a company faces as it expands. the average cost decreases

Question 15

What is diseconomies of scale

Answer 15

Economies of scale are the cost disadvantages a company faces as it expands. the average cost increases

Question 16

What are the two types of economies of scale and describe them

Answer 16

• Internal economies of scale - cost benefits an individual firm can benefit form when it expands
• external economies of scale - cost benefits for all firms in an industry when the industry expands

Question 17

What are all internal economies of scale and expand where neccessary

Answer 17

• Bulk buying - Firms that buy lots of resources get them at cheaper rates
• Marketing - advertisement comes at a fixed cost, so its more efficient when it can be spread over more units of output
• technical - larger factors are often more efficient than smaller ones
• financial - banks are more likely to lend money to large firms
• risk bearing - large firms have deep pockets so they can take risks
• Managerial - can hire managers and more specialized workers

Question 18

What are all external economies of scale and expand where necessary

Answer 18

• Skilled labor - as the industry grows, there will be more skilled workers, so companies can offer lower salaries
• better infrastructure
• access to suppliers - established industries encourage suppliers to set up nearby

Question 19

What are all diseconomies of scale and expand where necessary

Answer 19

• lack of communication
• lack of control
• reliance/too much bureaucracy - too much time filling reports

Question 20

what is wage rate

Answer 20

the wage rate is the amount of money paid to workers for their services over a period of time

Question 21

what is a boom

Answer 21

a boom is a large increase in business activity

Question 22

what is a bust

Answer 22

A bust is a large decreases in business activity

Question 23

What is wage determination

Answer 23

wage determination is the equilibrium between supply and demand for labour

Question 24

Describe and explain the demand for labour graph

Answer 24

A graph that shows the relationship between wage rate and availability of workers. the line shows an inverse relationship.

This is because with a higher wage rate, the company cannot afford an abundance of workers

Question 25

What are factors affecting the demand for labour

Answer 25

- availability of substitutes - with new and improved technology, workers are less valuable - other employment costs - E.G healthcare - Demand for product - demand for labour is a derived demand - productivity of labour - if workers are exceeding the levels of output, they're more valuable

Question 26

Describe and explain the supply of labor graph

Answer 26

A graph that shows the relationship between wage rate and quantity of workers available. the line shows a positive correlation. this is because more workers are willing to take a job that pays more money.

Question 27

what are factors affecting supply for labour

Answer 27

- population size - age distribution - female participation - skills and qualifications - School leaving & retirement age - migration -some countries promote immigration for more workers

Question 28

What is the importance of quality & quantity of labour to businesses

Answer 28

FINISH

Question 29

What is the division of labour

Answer 29

division is labour is the breaking down of the production process into small pats with each worker allocated apecific task

Question 30

What are the advantages of division of labor and expand where necessary

Answer 30

- Improved efficiency - as workers specialize they perform tasks quicker and more accurately - reduced production time - less time moving from one place to another - improved organization of product - more specialist tools available - leads to improved efficiency

Question 31

What are some disadvantages of the division of labor and expand where necessary

Answer 31

- tasks become repetitive and boring - reduced productivity - loss of flexibility in the workplace - potential problems if one stage is disrupted - reduced productivity

Question 32

What is a trade union

Answer 32

a trade union is an organization representing people working in a particular industry or profession that protects their rights

Question 33

What are common aims of trade unions

Answer 33

- negotiate pay & working conditions with employees - provide legal protection for workers- E.G discrimination - pressure the government to introduce regulations that improve the rights of employees - provide financial benefits such as strike pay

Question 34

what are the effects of trade unions

Answer 34

- Successful trade unions will be able to force wage rates up in markets. however, companies will struggle to handle these new wage costs and lay off workers as a result - the strikes caused by some trade unions can significantly disrupt economic activity. this can also be dangerous in areas such as healthcare.