Chapter 36 - Growth And Survival Of Firms

Question 1

Conglomerate

Answer 1

A company with a large number of diversified businesses.

Question 2

Economies Of Scope

Answer 2

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

Question 3

Diversification

Answer 3

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

Question 4

Horizontal Integration

Answer 4

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

Question 5

Vertical Integration

Answer 5

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

Question 6

Principal Agent Problem

Answer 6

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

Question 7

Problems To Cartels

Answer 7

• 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