3.3 Flashcards
Explain managerial economies of scale
Where senior managers can cover more output
What does being in the long run mean
All factors of production are variable
Draw long run perfect competition
What does being in the short run mean
At least 1 fixed factor of production
What are the conditions for perfect competition
Lots of small firms Undifferentiated products Price takers Symmetric information Low barriers to entry/ exit
Explain risk bearing economies of scale
Large firms can diversify into new markets
Have something to fall back onto
Can cross subsidise as well
What is average cost
Average cost per unit
How does PED vary along the demand curve
What is marginal revenue
Revenue earnt from selling one more
Draw long run monopolistic competition
Explain marketing economies of scale
Can spread to FC of marketing over a larger output
Explain purchasing economies of scale
Getting a discount from buying a bulk quantity
How do firms get diseconomies of scale
Demotivated workforce
Lack of communication
Ineffective management
Sloppy chain of command -> control
Draw an MES diagram
What are the conditions for monopolistic competition
Asymmetric information Differentiated products Price setting ability Low barriers to entry/ exit
Draw an increase in internal economies of scale
Explain financial economies of scale
Can raise finance easier, seen as less of a risk
Explain diminishing marginal returns
When employing an extra unit of the variable starts to make the marginal productivity decrease , increasing marginal cost
You get less back than the previous unit gave
What is average revenue
Average receipt per unit (PRICE)
How can a lose making firm stay open in the SR
As long as the business is making enough to cover its day to day costs and make a contribution to its fixed costs then it should continue to operate.
Will allow time for staff to relocate or for demand for the good to pick up again
Draw an increase in external economies of scale
Explain diminishing average returns
When employing an extra unit of the variable starts to make the average productivity decrease , increasing avergage cost
You get less back than the previous unit gave
What is diseconomies of scale
When output increases so does costs
What is marginal cost
Cost of selling one more unit
Name some external economies of scale
Governemnt investing in infrastructure
Joint ventures
Ancillary services setting up
