Micro Questions

Question 1

Why may a manager of the firm choose to profit satisfice

Answer 1

Once a firm has made enough profit, may choose to persue:

Social objectives - e.g helping local community
Personal objectives - e.g spending more time with family

Question 2

Profit satisficing

Answer 2

A company makes just enough profit to pay its workers and for shareholders to be satisfied with their returns

Question 3

What point achieves revenue maximisation

Answer 3

MR = 0

Question 4

Profit maximisation point

Answer 4

MC=MR

Question 5

Sales maximisation (normal profit)

Answer 5

AC = AR

Question 6

Regulatory capture

Answer 6

When regulators begin to favour the company they’re regulating

Question 7

When a firm is profit maximising, is it productive efficient?

Answer 7

No because not producing on lowest point on AC curve

Question 8

Short run shut down point

Answer 8

P (AR)=AVC

Question 9

When will a firm shut down (SR)

Answer 9

If AR < AVC

Question 10

AVC

Answer 10

Variable costs change with output

AVC = TVC/Q

Question 11

AR is also what

Answer 11

Price

Question 12

Perfect competition

Answer 12

Many buyers and sellers
Homogenous goods
perfect information
no barriers to entry exit

Question 13

Productive efficient

Answer 13

Firm is producing at lowest point on AC curve

Question 14

Division of labour

Answer 14

Firm splits up production processes into smaller separate tasks, assigns different workers to each of these tasksp

Question 15

Advantages of division of labour

Answer 15

Increase productive and output by specialising and using specialist equipment

Decrease unit costs bc workers more efficient

Question 16

Disadvantage of specialisation of labour

Answer 16

Specialised workers will have 1 skill

May end up unemployed

Question 17

Why will a firm continue producing if it can cover its variable costs, even if it is making a loss

Answer 17

In the long run it will pay off its fixed costs and make a profit

Question 18

Public good

Answer 18

Non excludable (can't stop others from using a public good)
Non rival (use good at the same time as someone else)

Question 19

Contestablity

Answer 19

How easy it is to enter a market

Question 20

Predatory pricing

Answer 20

Setting price below AVC to drive out competitors from market

Question 21

Horizontal integration

Answer 21

Firms at the same stage of production process join together

Question 22

CMA

Answer 22

Competition and markets authority protects consumers from being exploited by firms using regulation and competition policy

Question 23

Merger policy

Answer 23

CMA can block mergers if they Believe the merger will negatively affect consumers

Question 24

Consequence of horizontal merger

Answer 24

Exploit greater market share

Higher market power

Question 25

When does diseconomies of scale start?

Answer 25

Beyond MES (maximum efficiency scale)

Question 26

Carbon tax

Answer 26

A tax in firms for every tonne of carbon they emit

Question 27

Carbon tax RLA

Answer 27

In Australia firms have to pay £5 levy on every tonne of greenhouse gas they emit

Question 28

FOR carbon tax

Answer 28

Directly raise revenue for Gov

Question 29

Tax forces firms to innovate

Answer 29

Increase the cost of polluting

Firms need to find cheaper less polluting methods

Question 30

FOR pollution permits

Answer 30

Firms can pollute as much as they want with a carbon tax

Permits cap pollution to government target

Question 31

Permits reduce pollution in

Answer 31

The most cost-effective way

Limits job losses unlike tax