3.1.1 - Size and types of firms

Question 1

What is a sole trader?

Answer 1

someone who runs a business by themselves

Question 2

What is a partnership?

Answer 2

Business ran by 2-25 people

Question 3

what are Private Limited Companies (Ltd)?

Answer 3

owned by shareholders, only people you directly know

Question 4

What is a Public Limited Company (plc)?

Answer 4

anyone can buy shares/you can advertise shares

Question 5

Reasons firms stay small or grow

Answer 5

Economies of scale -> decreased unit costs
Greater market share -> influence/power
More secure -> more assets/wealth

small - keeps costs low, hire less people

Question 6

Aims of firms

Answer 6

profit maximisation - MC=MR
revenue maximisation - MR=0
sales maximisation - AC=AR

Question 7

Principal Agent problem

Answer 7

someone working on your behalf has different interests, owner vs. control.
Managers might not listen to shareholders

Question 8

What is satisficing?

Answer 8

do enough to keep owners content, rather than overall objectives and aims.
Alight interests -> Performance Related Pay (PRP)

Question 9

What is the private sector?

Answer 9

ran by individuals in the economy

Question 10

What is the public sector?

Answer 10

owned and controlled by the government to provide a sector