Chapter 36 - Growth And Survival Of Firms Flashcards
1
Q
Conglomerate
A
A company with a large number of diversified businesses.
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.
3
Q
Diversification
A
Where a firm grows through the production or sale of a wide range of different products.
4
Q
Horizontal Integration
A
Where a firm merges or acquires another in the same line of business.
5
Q
Vertical Integration
A
Where a firm grow by producing backwards or forwards in its supply chain.
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 )
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