Chapter 20: Firms Flashcards
Industry
A group of firms producing the same product
Quaternary sector
Covers service industries that are knowledge based
Internal growth
An increase in the size of a firm resulting from it enlarging existing plants or opening new ones
External growth
An increase in the size of a firm resulting from it merging or taking over another firm
Horizontal merger
The merger of firms producing the same product and at the same stage of production
Vertical merger
The merger of one firm with another firm that either provides an outlet for its products or supplies it with raw materials, components or the products it sells
Conglomerate merger
A merger between firms producing different products
Rationalisation
Eliminating unnecessary equipment and plant to make a firm more efficient
Vertical merger backwards
A merger with a firm at an earlier stage of the supply chain
Vertical merger forwards
A merger with a firm at a later stage of the supply chain
Economies of scale
The advantages, in the form of Lower long run average costs (LRAC), of producing on a larger scale
Internal economies of scale
Lower long run average costs resulting from a firm growing in size
External economies of scale
Lower long run average costs resulting from an industry growing in size
Internal diseconomies of scale
Higher long run average costs arising from a firm growing too large
External diseconomies of scale
Higher long run average costs arising from an industry growing too large
