Theory Of The Firm

Question 1

Define a plant or establishment

Answer 1

It is a unit of production in an industry or any economic unit that carries its own business

Question 2

Define a firm

Answer 2

It is a unit of ownership and control

Question 3

Define an industry

Answer 3

It is all firms concerned with the production of similar products or in the same line of production

Question 4

Define internal economies of scale

Answer 4

These are the benefits which accrue to a firm independent of what is happening to other firms

Question 5

Define external economies of scale

Answer 5

These are economies of scale available to all firms in the industry independent of changes in the scales of their individual outputs

Question 6

State 2 types of internal economies of scale

Answer 6

> plant economies of scale
Firm economies of scale

Question 7

Firm economies of scale include

Answer 7

Technical economies
Financial economies
Risk bearing economies
Research and development economies
Managerial economies
Etcetera