3 - AO1 Flashcards
Vertical integration
Merger with a firm at a different stage of the production process in the same industry
Horizontal integration
Merger with a firm in the same stage of the production process in the same industry
Conglomerate mergers
Merger between firms in unrelated industries
Satisficing
Making enough to keep shareholders happy but not aiming to maximise profits
Demerger
- The separation of a larger firm into two or more smaller organisations
- Often as the reversal of a previous merger
Short-run
A time period where at least one factor of production is fixed
Long-run
A time period where all factors of production are variable
Variable costs
Costs that vary proportionately with output
Fixed costs
Costs that do not vary with output
Marginal cost
A change in total costs when one more unit of output is produced
Average costs
Average cost per unit of output
Economies of scale
A fall in long-run average costs as output increases
Diseconomies of scale
A rise in long-run average cost as output increases
Sales maximisation
Where AC=AR
Revenue maximisation
Where MR=0
Profit maximisation
Where MC=MR
Productive efficiency
Where MC=AC
Allocative efficiency
Where P=MC
Price fixing
Firms coming together to ensure that prices remain stable, thus avoiding price competition
Merger
The joining together of at least two firms to form one entity
Competitive tendering
The process by which a number of private-sector firms compete to win the right to perform a task pm behalf of the government. They will charge the government for the particular task and seek to make a profit.
