1.2 Business Economics :Unit 17 - Unit 21 Flashcards
1
Q
- What do you mean by “scale”?
A
size of the business.
2
Q
- What is economies of scale?
A
it is the falling in average costs due to expansion.
3
Q
- What is diseconomies of scale?
A
- rising average costs when a firm becomes too big.
4
Q
- What is internal economies of scale?
A
cost benefits that an individual firm can enjoy when it expands.
5
Q
- What are the 7 types/ reasons for economies of scale?
A
- Purchasing economies.
- Marketing economies.
- Technical economies.
- Financial economies.
- Managerial economies.
- Risk-bearing economies.
6
Q
- What is bulk buying?
A
- buying goods in large quantities, which is usually cheaper than buying in small quantities.
7
Q
- What is external economies of scale?
A
- cost benefits that all firms in an industry can enjoy when the industry expands.
8
Q
- What are the 4 reasons to external economies of scale?
A
- Skilled labor
- Infrastructure
- Access to suppliers
- Similar business in the area.
9
Q
- What are the 4 reasons to diseconomies of scale?
A
- Bureaucracy.
- communication problems.
- Lack of control.
- Distance between senior staff and shop floor workers.
10
Q
- What is competition?
A
- rivalry that exists between firms when trying to sell goods to the same group of customers.
11
Q
- What are the barriers to entry?
A
- obstacles that might discourage a firm from entering a market.
12
Q
- What are 5 common features to competitive markets?
A
- large number of buyers and sellers.
- products sold by each firm are close substitutes for each other.
- Low barriers to entry
- Almost no control over price charged.
- Free flow of information about the nature of products.
13
Q
- How do firms compete with other competitors in the markets?(4)
A
- keeping costs as low as possible.
- providing good quality products with high levels of customer services.
- charging prices that are acceptable to customers.
- Innovating by constantly reviewing and improving the product.
14
Q
- What do you mean by innovative?
A
commercial exploitation of a new invention.
15
Q
- What is production differentiation?
A
attempt by a firm to distinguish it product from that of rival.
16
Q
- What is the main disadvantage in competitive markets?
A
lower profit.
17
Q
- What are the 3 advantages of competition to consumers.
A
- Lower prices.
- More choice.
- Better quality.
18
Q
- What are the 2 disadvantages of competition to consumers?
A
- market uncertainty
- Lack of innovation