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Microeconomics Revision > Business behaviour and the labour market - glossary > Flashcards

Business behaviour and the labour market - glossary Flashcards

1
Q

Backward vertical integration

A

When one firm merges with another which operate at the previous stage of production in the same industry to form one larger firm. The purchaser merges with its supplier.

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2
Q

Conglomerate integration

A

A joining together into one firm of two or more firms producing unrelated products.

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3
Q

Demerger

A

When a firm splits into two or more independent businesses.

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4
Q

Divorce of ownership from control

A

Occurs when the managers and directors of a business are a different group of people from the owners of the business.

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5
Q

Forward vertical integration

A

When one firm merges with another firm which operates at the next stage of production, in the same industry to form one larger firm. The supplier merges with one of its buyers.

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6
Q

Horizontal integration

A

When two or more firms operating at the same stage of production in the same industry merge together to form one large firm.

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7
Q

Niche market

A

A small segment of a much larger market.

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8
Q

Merger

A

The joining together of two or more firms under common common ownership.

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9
Q

Not for profit organisations

A

Organisations that do not have making a profit as a goal but use any profit they generate to support their aims.

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10
Q

Organic/internal growth

A

A firm increasing its size through investment in capital equipment or an increased labour force.

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11
Q

Private sector organisations

A

Organisations that are owned by individuals or companies and not the state.

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12
Q

Public sector organisations

A

Organisations that are owned and controlled by the state.

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13
Q

Synergy

A

When two or more activities or firms put together can lead to greater outcomes than the sum of the individual parts.

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14
Q

Vertical integration

A

When two or more firms, operating at different stages of production in the same industry, merge to form one larger firm.

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15
Q

Average revenue

A

The average receipts per unit sold. It is equal to total revenue divided by quantity sold.

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16
Q

Marginal revenue

A

The addition to total revenue of an extra unit sold.

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17
Q

Total revenue

A

The total money received from the sale of any given quantity of output.

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18
Q

Average product

A

The quantity of output per unit of factor input. It is the total product divided by the level of output.

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19
Q

Law of diminishing marginal returns

A

If increasing quantities of a variable input are combined with a fixed input, eventually the marginal product and then the average product of that variable input will decline. Diminishing returns are said to exist when this decline occurs.

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20
Q

Long run

A

The period of time when all factor input can be varied, but the state of technology remains constant.

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21
Q

Marginal product

A

The addition to output produced by an extra unit of input. It is the change in total output divided by the change in the level of inputs.

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22
Q

Returns to scale

A

The change in percentage output resulting from a percentage change in all the factors of production. There are increasing returns to scale if the percentage increase in output is greater than the percentage increase in factor employed. Constant returns if it is the same and decreasing returns if it is less.

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23
Q

Short run

A

The period of time when at least one factor input to the production process cannot be varied.

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24
Q

Total product

A

The quantity of output measured in physical units produced by a given number of inputs over a period of time.

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25
Q

Average cost

A

The average cost of production per unit, calculated by dividing the total cost by the quantity produced.

Avg cost = AVC + AFC

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26
Q

Average fixed cost

A

Total fixed cost divided by the number of units produced.

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27
Q

Average variable cost

A

Total variable cost divided by the number of units produced.

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28
Q

Diseconomies of scale

A

A rise in the long run average costs of production as output rises.

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29
Q

Economic cost

A

The opportunity cost of an input to the production process.

30
Q

Economies of scale

A

A fall in the long run average costs of production as output rises.

31
Q

External economies of scale

A

Falling average costs of production, which is shown by a downwards shift in the AC curve. This results from a growth in the size of the industry within which the firm operates.

32
Q

Fixed costs

A

Costs that do not vary with output.

33
Q

Imputed cost

A

An economic cost which a firm does not pay for with money to another firm, but is the opportunity cost of factors of production which the firm itself owns.

34
Q

Internal economies of scale

A

Economies of scale which arise because of the growth in the scale of production, within a firm.

35
Q

Marginal cost

A

The cost of producing an extra unit of output.

36
Q

Minimum efficient scale of production (MES)

A

The lowest level of output at which long run average cost is minimised.

37
Q

Optimum level of production

A

The range of output over which long run average cost is lowest.

38
Q

Semi-variable cost

A

A cost which contains within it a fixed cost element and a variable cost element.

39
Q

Total cost

A

The cost of producing any given level of output. It is equal to TVC + TFC.

40
Q

Total fixed cost (TFC)

A

The value of the cost which doesn’t vary with output.

41
Q

Total variable cost (TVC)

A

The overall cost of those factors of production that vary directly with output produced.

42
Q

Variable costs

A

Cost which vary directly with output.

43
Q

Abnormal profit

A

The profit over and above normal profit.

44
Q

Break-even profit

A

The levels of output where total revenue equals total cost.

45
Q

Normal profit

A

The profit that the firm could make by using its resources in their next best use. Normal profit is an economic cost.

46
Q

Barriers to entry

A

Factors which make it difficult/impossible for firms to enter an industry and compete with existing producers,

47
Q

Barriers to exit

A

Factors which make it difficult/impossible for firms to cease production and leave an industry,

48
Q

Concentration ratio

A

The market share of the largest firms in an industry.

49
Q

Homogeneous goods

A

Goods made by different firms, but are identical.

50
Q

Imperfect competition

A

A market structure where there are several numbers of firms in the industry, each of which has the ability to control the price that it sets for its products.

51
Q

Independence

A

In market theory, when the actions of one firms will have no significant impact on any other single firm in the market.

52
Q

Interdependence

A

In market theory, when the actions of one firm will have an impact on other firms in the market.

53
Q

Limit pricing

A

When a firm, rather than short term profit maximising, sets a low enough price to deter new entrants from coming into its markets.

54
Q

Market concentration

A

The degree to which the output of an industry is dominated by the largest producers.

55
Q

Market share

A

The proportion of sales in a market taken by a firm or a group of firms.

56
Q

Market structures

A

The characteristics of a market which determine the behaviour of firms within the market.

57
Q

Natural monopoly

A

Where economies of scale are so large relative to market demand that the dominant producer in the industry will always enjoy lower costs of production than any other potential competitor.

58
Q

Non-homogeneous goods

A

Goods which are similar but are not identical, that are made by different firms (e.g. branded goods).

59
Q

Perfect knowledge

A

Exists if all buyers in a market are fully informed of prices and quantities for sale, whilst producers have equal access to information about production techniques.

60
Q

Production differentiation

A

Aspects of a good or service which serve to distinguish one product from another ( e.g. product formulation, packaging, marketing or availability).

61
Q

Sunk costs

A

Costs of production which are not recoverable if a firms leaves the industry.

62
Q

Uncertainty

A

In market theory, when one firm does not know how other firms in the market will react if it changes to strategy (e.g. changing its price).

63
Q

Perfect competition

A

A market structure where there are many buyers and sellers, where there is freedom of entry and exit to the market, where there is perfect knowledge and where all firms produce homogeneous goods.

64
Q

Price taker

A

A firm which has no control over the market price and has to accept the market price if it wants to sell its product.

65
Q

Monopolistic competition

A

A market structure where a large number of small firms produces non-homogeneous products and where there are no barriers to entry or exit.

66
Q

Cartel

A

A formal agreement between firms to limit competition in the market (e.g. increasing prices and restricting output).

67
Q

Collusion

A

Collective agreements, either tacit or formal, between firms that restrict competition.

68
Q

Collusive oligopoly

A

A market with a high concentration ratio where a few interdependent firms cooperate, either formally or tacitly, to restrict competition.

69
Q

Concentrated market

A

A market where most of the output is produced by a few firms and where therefore the concentration ratio is high.

70
Q

Duopoly

A

An industry where there are only 2 firms.

Microeconomics Revision (3 decks)

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