Objectives of Firms

Question 2

conglomerate

Answer 2

company with large number of diversified businesses

Question 3

economies of scope

Answer 3

average costs can be reduced due to a firm producing a wider range of products rather than specialising in just one or a few products

results from diversifying product portfolio

Question 4

horizontal integration

Question 5

vertical integration

Question 6

principal-agent problem

Answer 6

objectives of the agent differ from those of the agent, on whose behalf the agent acts

occurs due to asymmetrical information and is an example of moral hazard

Question 7

profit satisficing

Answer 7

maintain a satisfactory level of profit

meeting as many stakeholders’ needs as possible?

Question 8

cross-subsidisation

Answer 8

profits from one part of a firm are used to offset losses made elsewhere in the business

Question 9

price discrimination

Answer 9

charging different groups of consumers different prices for the same product for reasons unrelated to costs