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Econ > Econ Micro Yr2 > Flashcards

Econ Micro Yr2 Flashcards

1
Q

Fixed factors of production

A

Land and capital

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2
Q

MES

A

minimum efficient scale : lowest level of output required to maximise EOS

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3
Q

Increasing Return to scale

A

%change in output is greater than %change in input

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4
Q

EOS internal

A

Really Fun Mums try making pies
-Risk Bearing
-Financial
-Managerial
-Technical
-Marketing
-Purchasing

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5
Q

EOS external

A

Better transport infrastructure
Component suppliers made closer
RandD firms move more closer

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6
Q

Types of Diseconomies if scale

A

-Control
-Communication
-Coordination
-Motivation

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7
Q

Perfect competition Properties

A

-Many buyers and sellers
-Homogenous goods
-firms are price takers
-no barriers to entry/exit
-Perfect info
-Brand loyalty

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8
Q

Imperfect information Characteristics

A

-few buyers and sellers
-differentiated goods
-firms are price makers
-High barriers to entry and exit
-imperfect informations

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9
Q

Why profit maximise

A

-re-investment (dynamic efficient)
-pay shareholders who finance the business
-minimise cost and reduce prices for consumers
-entrepreneurship rewarded

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10
Q

Why to not profit maximise

A

Greater Scrutiny
Key shareholders harmed
-other objectives more appropriate

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11
Q

Profit satisfying

A

Sacrifice some profits to satisfy key stakeholders

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12
Q

Why revenue max

A

-EOS
-predatory pricing
-Principle agent problem
-

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13
Q

Sales max

A

-EOS
-limit pricing
-principle agent problem : divorce between ownership and control
-Floood the market (Amazon)

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14
Q

Barriers to entry

A

Any obstacle that prevents a firm from entering a market
LTSB
Legal
Technical
Strategic
Brand loyalty

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15
Q

LEGAL Barriers to entry

A

Patents
-Licences/permits
-Red tape (excessive paperwork:bureaucracy)
-standards/regulation (health and safety)
-insurance

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16
Q

TECHNICAL barriers to entry

A

-start up costs
-sunk cost
-EOS of other firms
-natural monopoly

17
Q

StrategicBarriers to entry

A

(Firms in the market do it :incumbent firms)
-Predatory price
-Limit pricing (break even)
-heavy advertising

18
Q

Barriers of exit examples

A

-under valuation of assets
-redundancy cost
-penalty for leaving contracts early
-sunk costs

19
Q

Allocative efficiency point on the graph

A

-demand = supply MSB=MSC P=MC

-resources follow consumer demand
-society surplus maximised

20
Q

Productive efficiency on the business graph

A

AC= MC
AVERAGE COST = MARGINAL COST
-lowest point on AC
-full exploitation of EOS

21
Q

X efficiency on the LRAC curve

A

Production anywhere on the AC curve
-minimise waste

Monopolies may want to increase profit but lack competitive drive to be X efficient
-Lack of profit drive for gov, don’t want to be X efficient

22
Q

Dynamic efficiency on the curve

A

Where it’s profit max
-MC=MR

23
Q

Allocative efficiency adv to consumer

A

Resources follow consumer demand
-low prices
-maximum of CS
-High choice
-High quality

24
Q

Allocative efficacy adv to suppier

A

Retain or increase market share
-stay ahead of rival (price competitive)
-increase profits

25
Q

Productive efficiency adv to consumer

A

-lower prices
-high consumer surplus
-full exploitation of EOS

26
Q

Productive efficiency adv to supplier

A

-more production at higher cost
-higher profit
-lower prices, greater market share

27
Q

Dynamic efficiency adv to consumer

A

-new innovative products
-lower prices over time due to new tech to speed up production lower AC
-higher consumer surplus

28
Q

Dynamic efficiency adv to supplier

A

-LR max profits
-lower cost overtime
-increase market share due to innovative products
-stay ahead of rivals, products can have a patent

29
Q

X efficiency adv to consumer

A

Lower prices
-high consumer surplus

30
Q

X efficiency adv to supplier

A

-lower cost
-higher profits
-lower prices increasing market share

Econ (4 decks)

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