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Economics > 3.1 Business Behaviour > Flashcards

3.1 Business Behaviour Flashcards

1
Q

Why do some firms stay small

A

-Size of market may be small
-Lack of economises of scale
-Limited access to finance

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2
Q

Why do firms want to grow

A

-Economies of scale
-To increase market share
-To reduce risk

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3
Q

What is a private sector firm

A

Where firms that are owned by private individuals

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4
Q

What is a public sector firm

A

A firm which is owned by the government

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5
Q

What is an example of a public sector firm

A

-NHS
-Network Rail

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6
Q

What is an example of a private sector firm

A

-Apple
-Amazon

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7
Q

What is a non profit organisation

A

Firms which primary motives is not for profit

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8
Q

What is profit organisation

A

Firms that aim to maximise profits

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9
Q

What is an example of an non profit organisation

A

-BBC
-WWF

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10
Q

What is organic growth

A

Internal growth where the business does not grow through an acquisition

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11
Q

What is an advantage of organic growth

A

-Less risk
-Maintains business culture
-No need for restructuring

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12
Q

What is a disadvantage of organic growth

A

-Growth will be slower
-May decrease competitiveness in business
-Firms may become too specialised

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13
Q

What is exeternal growth

A

A firm growing by being bought out by another firm through a merger of acquisition

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14
Q

What is horizontal integration

A

Where a firm merges with a firm at the same production stage/process

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15
Q

What are the advantages of horizontal integration

A

-To increase market share
-To gain economies of scale
-To eliminate a competitor

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16
Q

What are the disadvantages of horizontal integration

A

-Diseconomies of scale
-Increased fixed costs
-Some workers many lose their jobs due to duplication of jobs

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17
Q

What is vertical integration

A

Where a firm merges with another firm which is at a different stage in the production process

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18
Q

What is backward integration

A

Where a firm mergers with a supplier

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19
Q

What is forward integration

A

Where a firm mergers with a firm that is ahead of them in the production process

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20
Q

What is an advantage of Backward integration

A

-More control over raw material and make them more guaranteed
-Can prevent competitors buying from the same suppliers

21
Q

What is a disadvantage of Forward integration

A

-Risk of making a loss

22
Q

What is a disadvantage of Backward integration

A

-Diseconomies of scale
-May not have the correct knowledge

23
Q

What is an advantage of Forward integration

A

-Can help lead to an increase in profits

24
Q

What is conglomerate integration

A

When a firm buys another firm that is completely unrelated to each other

25
Q

What is an advantage of conglomerate integration

A

-Spreads the risk
-Brand gains more recognition

26
Q

What is a disadvantage of conglomerate integration

A

-Culture clash
-Lack of knowledge inn new area

27
Q

What is a demerger

A

The separation of large company into two or more smaller ones

28
Q

List the reasons for a demerger

A

-To avoid diseconomies of scale
-To raise finance
-To increase profit
-To meet demands of regulators

29
Q

What is Total Revenue and Equation

A
  • The amount of money the firm earns
  • Price x Quantity
30
Q

What is Average Revenue and the Equation

A
  • The amount the firm receives per unit sold
  • Total Revenue / Quantity
31
Q

What is Marginal Revenue and the Equation

A
  • The change in total revenue from selling one more unit of output
  • Change in revenue / Change in quantity
32
Q

How do you work out Total Cost

A

Total Variable Cost + Total Fixed Cost

33
Q

How do you work out Total Fixed Cost

A

Total Cost - Total Variable Cost

34
Q

How do you work out Average Total Cost

A

Total Cost / Quantity

35
Q

What is Allocative Efficiency

A

Where resources are allocated to maximise utility

36
Q

Where can you find Allocative Efficiency

A

P=MC

37
Q

What is Productive Efficiency

A

Where a firm produces a good or service at its lowest possible cost

38
Q

What is Dynamic Efficiency

A

The ability to innovate

39
Q

What is X-Inefficiency

A

Where a firm doesn’t operate at its lowest cost

40
Q

What is the Market Structure for Perfect Competition

A
  • Low Barriers to Entry
  • Perfect Information
  • Homogenous Goods
  • A lot of firms
41
Q

What is the Market Structure of Monopolistic Competition

A
  • Many Firms
  • Low Barriers to Entry
  • Goods are Differentiated
  • Imperfect Information
42
Q

What is the Market Structure for an Oligopoly

A
  • High Barriers to Entry
  • Few Firms
  • Product Differentiation
43
Q

What is Interdependence

A

When the action of one firms affects another firm

44
Q

Define Overt Collusion

A

Direct contact by both firms to fix prices

45
Q

Define Tacit Collusion

A

Firms act independently but jointly exercise their power to fix prices

46
Q

What is a Cartel

A

An agreement with firms not to compete with each other

47
Q

Where can you find Profit Maximisation

A

MC = MR

48
Q

Where can you find Sales Maximisation

A

AC = AR

49
Q

Where can you find Revenue Maximisation

A

MR = 0

Economics (8 decks)

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