The private firm as producer and employer

Question 1

advantages of being a sole trader

Answer 1

easy to set up
autonomy in decision making
flexible
sense of achievement

Question 2

disadvantages of being a sole trader

Answer 2

lack of continuity 
limited specialisation
lot more on the plate
unlimited liability 
limited access to funds

Question 3

advantages of being in a partnership

Answer 3

able to raise far more capital as compared to a sole trader
continuity
specialisation
working relationships and environment tend to be warm and decent

Question 4

disadvantages of being in a partnership

Answer 4

lack of autonomy in decision making process

may have unlimited liability

Question 5

advantages of being in a llc

Answer 5

easier to raise capital

economies of scale

Question 6

disadvantages of being in an llc

Answer 6

lack of privacy

diseconomies of scale

Question 7

advantages of being in a mnc

Answer 7

economies of scale
help improve standard of living 
able to raise far more profit due to overseas market
spread risks
avoid tariffs

Question 8

disadvantages of being in a mnc

Answer 8

tax regulation
administrative issues
frowned upon for their cost cutting practices
eliminate competition
diseconomies of scale

Question 9

advantages of being in a co-operative

Answer 9

incentives
higher productivity
socially respnosible

Question 10

disadvantages of being in a co-operative

Answer 10

slow decision making
lack of autonomy in decision making
inefficient managers due to lower wages

Question 11

advantages of being a public sector corporation

Answer 11

adequate provision of essentials

generate revenue for the government

Question 12

disadvantages of being a public sector corporation

Answer 12

opportunity cost
inefficient due to lack of incentive
may form monoplies

Question 13

factors affecting choice of business organisation

Answer 13

ownership
profit
control
source of finance

Question 14

how does a firm decide if it wants to opt for labour or capital intensive production?

Answer 14

cost
objectives
size of market

Question 15

define productivity

Answer 15

measure of how efficiently the resources are employed in the production process

Question 16

why is productivity important

Answer 16

economies of scale
profit
wages
growth
competitiveness

Question 17

difference between productivity and production

Answer 17

fop+productivity=production

Question 18

determinants of productivity

Answer 18

innovation
skills and experience 
entrepreneurial spirit 
competition
investment

Question 19

what is a fixed cost

Answer 19

a cost that must be payed even if there is no output does not change in the long run

Question 20

variable cost depends on

Answer 20

output

Question 21

total cost=

Answer 21

fixed cost + variable cost

Question 22

what is revenue

Answer 22

price x quantity sold

Question 23

profit maximisation

Answer 23

p>mc

Question 24

alternative business objectives

Answer 24

survival
ethical objectives
market share
image and reputation

Question 25

6 characteristics of a perfect competition

Answer 25

``` many buyers and sellers price takers homogenous product perfect knowledge no barriers to entry p=mc ```

Question 26

4 characteristics of a monoply

Answer 26

single supplier price makers high barriers to entry imperfect knowledge

Question 27

8 kinds of pricing policies

Answer 27

``` cost plus pricing competition based pricing penetration pricing promotional pricing loss leader pricing skimming ```

Question 28

disadvantages of monopoly

Answer 28

allocative inefficiency price inelastic imperfect knowledge

Question 29

advantages of monopoly

Answer 29

internationally competitive due to low average cost innovation eliminate wasteful competition

Question 30

how can the size of a firm be measured

Answer 30

number of employees market share capital employed sales turnover

Question 31

how do businesses grow

Answer 31

internal growth | external growth

Question 32

how can a firm experience organic growth

Answer 32

franchising investment number of branches

Question 33

how can a firm experience external growth

Answer 33

merges or takeover

Question 34

what are the kinds of merges

Answer 34

``` horizontal integration(same sector) backward vertical integration(for example secondary with primary) forward vertical integration(primary with secondary) conglomerate integration/diversification(canopy) ```

Question 35

advantages of horizontal integration

Answer 35

increased market share economies of scale lower average cost

Question 36

disadvantages of horizontal integration

Answer 36

surge in unemployment | diseconomies of scale

Question 37

advantages of vertical integration

Answer 37

improved quality less wastage economies of scale

Question 38

disadvantages of vertical integration

Answer 38

diseconomies of scale

Question 39

why do small firms co-exist beside large firms

Answer 39

``` a wide choice of particular products a wide product range a personalised experience diseconomies of scale lack of access to larger firms ```

Question 40

what are the seven kinds of internal economies of scale

Answer 40

``` purchasing technical financial risk bearing r&d marketing ```

Question 41

list some external economies of scale

Answer 41

proximity to related firms availability of skilled labour access to transport

Question 42

possible reasons for diseconomies of scale

Answer 42

poorer communication slower decision making lack of motivation