16-21

Question 1

costs

Answer 1

expenses that must be met when setting up and running a business

Question 2

fixed costs

Answer 2

costs that do not vary with the level of output

Question 3

variable costs

Answer 3

costs that change when output levels change

Question 4

total cost

Answer 4

fixed costs and variable costs added together

Question 5

scale

Answer 5

size of a business

Question 6

diseconomies of scale

Answer 6

rising average costs when a firm becomes too big

Question 7

economies of scale

Answer 7

falling average costs due to expansion

Question 8

internal economies of scale

Answer 8

cost benefits that an individual firm can enjoy when it expands

Question 9

bulk buying

Answer 9

buying goods in large quantities which is usually cheaper than buying in small quanitites

Question 10

external economies of scale

Answer 10

cost benefits that all firms in an industry can enjoy when the industry expands

Question 11

bureaucracy

Answer 11

system of administration that uses a large number of departments and officials

Question 12

competition

Answer 12

rivalry that exists between firms when trying to sell goods to the same group of customers

Question 13

barriers to entry

Answer 13

obstacles that might discourage a firm from entering a market

Question 14

innovative

Answer 14

commercial exploitation of a new invention

Question 15

product differentiation

Answer 15

attempt by a firm to distinguish its product from that of rival

Question 16

market niche

Answer 16

smaller market, usually within a large market or industry

Question 17

monopoly

Answer 17

situation where there is one dominant seller in a market