The private firm as producer and employer Flashcards
advantages of being a sole trader
easy to set up
autonomy in decision making
flexible
sense of achievement
disadvantages of being a sole trader
lack of continuity limited specialisation lot more on the plate unlimited liability limited access to funds
advantages of being in a partnership
able to raise far more capital as compared to a sole trader
continuity
specialisation
working relationships and environment tend to be warm and decent
disadvantages of being in a partnership
lack of autonomy in decision making process
may have unlimited liability
advantages of being in a llc
easier to raise capital
economies of scale
disadvantages of being in an llc
lack of privacy
diseconomies of scale
advantages of being in a mnc
economies of scale help improve standard of living able to raise far more profit due to overseas market spread risks avoid tariffs
disadvantages of being in a mnc
tax regulation administrative issues frowned upon for their cost cutting practices eliminate competition diseconomies of scale
advantages of being in a co-operative
incentives
higher productivity
socially respnosible
disadvantages of being in a co-operative
slow decision making
lack of autonomy in decision making
inefficient managers due to lower wages
advantages of being a public sector corporation
adequate provision of essentials
generate revenue for the government
disadvantages of being a public sector corporation
opportunity cost
inefficient due to lack of incentive
may form monoplies
factors affecting choice of business organisation
ownership
profit
control
source of finance
how does a firm decide if it wants to opt for labour or capital intensive production?
cost
objectives
size of market
define productivity
measure of how efficiently the resources are employed in the production process
why is productivity important
economies of scale profit wages growth competitiveness
difference between productivity and production
fop+productivity=production
determinants of productivity
innovation skills and experience entrepreneurial spirit competition investment
what is a fixed cost
a cost that must be payed even if there is no output does not change in the long run
variable cost depends on
output
total cost=
fixed cost + variable cost
what is revenue
price x quantity sold
profit maximisation
p>mc
alternative business objectives
survival
ethical objectives
market share
image and reputation
6 characteristics of a perfect competition
many buyers and sellers price takers homogenous product perfect knowledge no barriers to entry p=mc
4 characteristics of a monoply
single supplier
price makers
high barriers to entry
imperfect knowledge
8 kinds of pricing policies
cost plus pricing competition based pricing penetration pricing promotional pricing loss leader pricing skimming
disadvantages of monopoly
allocative inefficiency
price inelastic
imperfect knowledge
advantages of monopoly
internationally competitive due to low average cost
innovation
eliminate wasteful competition
how can the size of a firm be measured
number of employees
market share
capital employed
sales turnover
how do businesses grow
internal growth
external growth
how can a firm experience organic growth
franchising
investment
number of branches
how can a firm experience external growth
merges or takeover
what are the kinds of merges
horizontal integration(same sector) backward vertical integration(for example secondary with primary) forward vertical integration(primary with secondary) conglomerate integration/diversification(canopy)
advantages of horizontal integration
increased market share
economies of scale
lower average cost
disadvantages of horizontal integration
surge in unemployment
diseconomies of scale
advantages of vertical integration
improved quality
less wastage
economies of scale
disadvantages of vertical integration
diseconomies of scale
why do small firms co-exist beside large firms
a wide choice of particular products a wide product range a personalised experience diseconomies of scale lack of access to larger firms
what are the seven kinds of internal economies of scale
purchasing technical financial risk bearing r&d marketing
list some external economies of scale
proximity to related firms
availability of skilled labour
access to transport
possible reasons for diseconomies of scale
poorer communication
slower decision making
lack of motivation
