Chapter 36 - Growth And Survival Of Firms Flashcards

1
Q

Conglomerate

A

A company with a large number of diversified businesses.

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2
Q

Economies Of Scope

A

Where a reduction in average total cost is made possible by a firm changing the different goods it produces.

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3
Q

Diversification

A

Where a firm grows through the production or sale of a wide range of different products.

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4
Q

Horizontal Integration

A

Where a firm merges or acquires another in the same line of business.

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5
Q

Vertical Integration

A

Where a firm grow by producing backwards or forwards in its supply chain.

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6
Q

Principal Agent Problem

A

Where one person ( The Agent )(Board Of Directors ) makes decisions on behalf of another person ( The Principal ) ( The Owner - Shareholders )

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7
Q

Problems To Cartels

A
  • Possible price wars
  • Some members have higher costs than others
  • No dominant member has the power to control others
  • Legal obstacles as cartels are illegal and restrict competition, not in the best interest of consumers
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