theme 3 Flashcards
diseconomies of scale
occurs when an increase in the scale of output results in a higher cost per unit
public sector organisations
owned or controlled by the government
private sector organisation
owned or controlled by individuals
culture clash
a conflict between workers as a result of different working norms or value systems
specialisation
can do their jobs more quickly and to better standard then people who are not specialised
what are the 4 types of efficiency
allocative, productive, dynamic and x- efficiency
what is allocative efficiency
resources are allocated in such a way that consumers and producers get the maximum possible benefit
productive efficiency
There is no wastage of scarce resources and a high level of factor productivity
dynamic efficiency
Long-term efficiency is a result of innovation as a firm reinvests its profits
x - efficiency
Occurs when a firm lacks the incentive to control production costs
The ATC is higher than it should be
It often occurs due to a lack of competition in industry or in a firm that has no consequences for making a loss
characteristics of perfect competition
There are many buyers and sellers:
There are no barriers to entry firms can start-up or leave the industry with relative ease which increases the level of competition
Buyers and sellers possess perfect knowledge of prices:
The products are homogenous: this means firms are unable to build brand loyalty as perfect substitutes exist and any price changes will result in losing customers
monopolistic markets
There are a large number of small firms
There is low barriers to entry and exit from the industry:
The products are slightly differentiated: this structure exists as consumers
profit maximisers
There is a low degree of market power and some price setting ability
oligopoly
An oligopoly is a market structure where a small number of companies have a lot of influence over the industry. This gives them the power to control prices and restrict competition
game theory
Game theory helps identify the best decisions for individuals when their choices impact the outcome.
contestable markets
A contestable market occurs when there is freedom of entry into a market and where costs of exit are low
A contestable market and competition are different
Competition is based upon the number of firms competing in a market
A contestable market is based upon the threat of new entrants
