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Economics unit 3 > Business Behavior > Flashcards

Business Behavior Flashcards

1
Q

Fixed costs:

A

Costs that never change- capital costs

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2
Q

Variable costs:

A

Costs that will change on output- labour cost

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3
Q

Characteristics of market structures:

A 
No. Of suppliers
No. Of buyers
Price setters/ takers
Objectives
Barriers to entry or exit
Knowledge
Product
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4
Q

Normal profit

A

The minimum level of profit required to keep factors of production in current use. Included in the cost.

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5
Q

Super normal profit:

A

Anything above the normal profit

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6
Q

Business costs:

A 
Rent
Electricity
Labour
Machinery
Set up
Pension
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7
Q

Total revenue =

A

Price X quantity

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8
Q

Marginal revenue:

A

Revenue you get from selling ONE more

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9
Q

Average revenue:

A

How much you receive on average per product sold. Total revenue / output

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10
Q

Total revenue:

A

A firm maximises its revenue once marginal revenue = 0

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11
Q

Marginal product:

A

The additional unit of OUTPUT( product) produced as a result of an additional unit of INPUT (labour)
E.g Input. Output
Teacher Better grades
More students
Quality
More attention

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12
Q

Diminishing Marginal Returns:

A

As inputs are increased the increase in output becomes less and less

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13
Q

Business objectives:

A 
Maximise profits
Maximise sales revenue
Maximise sales volume
Show concern for the environment
Achieve satisfactory objectives
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14
Q

What can a business do to try and make as much profit as possible??

A

Lowering prices should encourage more people to buy your stock. This will increase the revenue gained.

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15
Q

Why is making as much profit as possible important for a company??

A

This is their main objective and key for a business, also it is helpful to expand your business. Furthermore companies want to protect their market share.

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16
Q

Why do some businesses prefer to stay small??

A 
Not enough money
No opportunity
No knowledge
Lack of confidence
Family ties- geographical mobility 
Happy as they are
17
Q

Business efficiency:

A

The ability of the business to maximise its output and minimise its input.

18
Q

Productive efficiency:

A

Operating at the lowest point on the AC curve

19
Q

Allocative efficiency

A

Producing goods and services people want

Marginal benefit=Marginal cost (P=MC)

20
Q

X inefficiency

A

Not operating on the AC curve

21
Q

Dynamic efficiency

A

Long term allocation of resources. Firms are efficient due to investing in R and D

22
Q

Horizontal integration:

A

Same level of supply chain

This occurs when firms merge at the same stage of production. This will be done to measure the size of a firm.

23
Q

Vertical integration:

A

Behind or In Front of the supply chain
This occurs when a firm merge at different stages of production. There are two types of of vertical integration– backward and forward

24
Q

Backward integration:

A

This occurs when a firm merges with another firm which is nearer to the source of production. E.G a car manufacturer buying a steel manufacturer

25
Q

Forward integration:

A

This occurs when a firm merges closer to the customer. E.G a car manufacturer buying a car showroom.

26
Q

Internal growth:

A

Growing internally as a business (increasing sales)

27
Q

Conglomerate integration:

A

When two businesses with nothing in common join together.

28
Q

Economies of scale:

A

Reducing your AC by increasing output

Increasing output spreads your Fixed and Varied costs over more products.

29
Q

Technical EOS

A

Spreading your capital costs over more products

30
Q

Managerial EOS

A

Recruiting specialist managers which increase efficiency

31
Q

Marketing EOS:

A

Spreading your marketing costs over more products.

32
Q

Purchasing EOS

A

Buying in bulk at a discount

33
Q

Financial EOS

A

Borrowing at a cheaper rate of interest

34
Q

Diseconomies of scale examples

A 
Laziness
Low morale
Lack of supervision
Poor communication 
Office policies
35
Q

Examples of external economies of scale:

A

The benefit to industry

Communication
Infrastructure
Educated graduates

36
Q

Revenue maximisation and position on a graph

A

Bringing in as much revenue as possible.

Occurs when MARGINAL REVENUE= 0

37
Q

Reasons for Revenue Maximisation:

A 
Keeps business going
Pay debts
Expansion
Customer loyalty
Expand market share
38
Q

Sales maximisation and position on a graph

A

Achieving the highest possible sales volume without making a loss

Occurs where AC = AR/D

Economics unit 3 (7 decks)

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