Theme 3 : Business behavior and the labor market Flashcards
Define Allocative efficiency?
When resources are allocated to the best interest of society, where there is maximum social welfare and utility so P=MC.
Define asymmetric information?
Where one party has more info than other causing market failure and problems for regulators.
Define Average cost/Average total cost?
The cost of production per unit
Define Average revenue?
The price each unit is sold for.
Define bilateral monopoly?
Where there is only one buyer and one seller in the market.
Define cartels?
A formal unlawful agreement where firms enter into an agreement to mutually set prices.
Define collusion?
This occurs when firms agree to work together
Define competition policy?
gov action to increase competition in markets.
Define competitive tendering?
Where the gov contracts out the provision of a good and invites firms to bid for the contract.
Define conglomerate intregration?
The merger of firms with no common connection
Define constant returns to scale?
Output increases by the same proportion that the inputs increase by.
Define contestable market?
When there is threat of new entrants, forcing firms to be efficient.
Define decreasing returns to scale?
An increase in inputs by a certain proportion will lead to output increasing by a smaller proportion.
Define demergers?
A single business is broken into two or more businesses to operate on their own.
Define deregulation?
The removal of legal barriers to allow private enterprise to compete in a previously protected market.
Define derived demand?
The demand for one good is linked to the demand for a related good.
Define diseconomies of scale?
The disadvantages that arise in large business that reduce efficiency and cause AC to rise.
Define dynamic efficiency?
Efficiency in the long run; concerned with new tech and increases in productivity which causes efficiency to increase over a period of time.
Define economies of scale?
The advantages of large scale production that enable a large business to produce at a lower AC than a smaller business.
Define external economies of scale?
An Advantage which arises from the growth of the industry within which the firm operates, independent of the firm itself.
Define fixed cost?
Costs which do not vary with output.
Define profit business?
A business whose main aim is to make money.
Define game theory?
Used to predict the outcome of a decision made by one firm; which has incomplete info about the other firm.
Define geographical mobility of labor?
The ease and speed at which labor can move from one area to another.
Define horizontal integration?
The merger of firms in the same industry at the same stage of production.
Define increasing returns to scale?
An increase in inputs by a certain proportion will lead to an increase in output by a larger proportion.
Define interdependent?
The actions of one firm directly affects another firm.
Define internal economies of scale?
An advantage that a firm is able to enjoy because of growth.
Define limit pricing?
when firms set prices too low in order to prevent new entrants.
define loss?
when revenue does nor cover costs.
define marginal cost?
the additional cost of producing one extra unit of good.
define marginal revenue?
the additional revenue gained by selling one extra unit of good.
Define maximum wage?
A ceiling wage which people cannot earn above.
Define minimum efficient scale?
The lowest level of output necessary to fully exploit economies of scale.
Define minimum wage?
A floor wage which people cannot earn below.
Define monopolistic competition?
When there are large num of buyers and sellers who are relatively small and act independently.
Define monopoly?
A single seller in the market.
Define monopsony?
A single buyers in the market. e.g google
Define N-firm concentration ratio?
The percentage of market share held by the ānā biggest firms.
Define nationalization?
When a private sector company or industry is brought under state control, to be owned and managed by the gov.
Define natural monopoly?
Where economies of scale are so large that not a single producer is able to fully exploit them, it is more efficient for there to be a monopoly than sellers.
Define non-collusive oligopoly?
When firms in an oligopoly compete against each other, rather than making agreement to reduce competition.
Define non-price competition?
When firms competet CELL other than price
e.g-like customer service they will aim to increase the loyalty to the brand.
Define normal profit?
The minimum reward required to keep entrepreneurs supplying their enterprise the return sufficient to keep cell to the business so tc=tr.
Define non-for-profit business?
when firms are run i order to maximise social welfare and help individuals and groups.
