Unit 3 Microeconomic decision makers

Question 1

Money

Answer 1

an item which is generally acceptable as a means of payment

Question 2

Commercial banks

Answer 2

banks which aim to make a profit by providing a range of banking services to households and firms

Question 3

Central bank

Answer 3

a government-owned bank which provides banking services to the government and commercial banks and operates monetary policy

Question 4

Liquidity

Answer 4

being able to turn an asset into cash quickly without a loss

Question 5

Disposable income

Answer 5

income left after income tax has been deducted and state benefits received

Question 6

Wealth

Answer 6

a stock of assets, including money held in bank accounts, shares in companies, government bonds, cars and property

Question 7

Rate of interest

Answer 7

a charge for borrowing money and a payment for lending money

Question 8

Average propensity to consume (APC)

Answer 8

the proportion of household disposable income which is spent

Question 9

Consumption

Answer 9

expenditure by households on consumer goods and income

Question 10

Savings ratio

Answer 10

the proportion of household disposable income that is saved

Question 11

Average propensity to save (APS)

Answer 11

the proportion of household disposable income that is saved

Question 12

Mortgage

Answer 12

a loan to help buy a house

Question 13

Earnings

Answer 13

the total pay received by a worker

Question 14

Wage rate

Answer 14

a payment which an employer contracts to pay a worker. It is the basic wage a worker receives per unit of time or unit of output.

Question 15

National minimum wage (NMW)

Answer 15

a minimum rate of wage for an hour’s work, fixed by the government for the whole economy.

Question 16

Elasticity of demand for labour

Answer 16

a measure of the responsiveness of demand for labour to a change in the wage rate

Question 17

Elasticity of supply of labour

Answer 17

a measure of the responsiveness of the supply of labour to a change in the wage rate

Question 18

Specialisation

Answer 18

the concentration on particular products or tasks

Question 19

Division of labour

Answer 19

workers specialising in particular tasks

Question 20

Trade union

Answer 20

an association which represents the interests of a group of workers

Question 21

Collective bargaining

Answer 21

representatives of workers negotiating with employers’ associations

Question 22

Industrial action

Answer 22

when workers disrupt production to put pressure on employers to agree to their demands

Question 23

Industry

Answer 23

a group of firms producing the same product

Question 24

Primary sector

Answer 24

covers industries which extract natural resources

Question 25

Secondary sector

Answer 25

covers manufacturing and construction industries

Question 26

Tertiary sector

Answer 26

covers industries which provide services

Question 27

Quaternary sector

Answer 27

covers knowledge-based service industries

Question 28

internal growth

Answer 28

an increase in the size of a firm resulting from it enlarging existing plants or opening new ones

Question 29

External growth

Answer 29

an increase in the size of a firm resulting from it merging or taking over another firm

Question 30

Horizontal merger

Answer 30

the merger of firms producing the same product and at the same stage of production

Question 31

Vertical merger

Answer 31

the merger of firms producing the same product but at a different stage of production

Question 32

Vertical merger backwards

Answer 32

a merger with a firm at an earlier stage of the supply chain

Question 33

Vertical merger forwards

Answer 33

a merger with a firm at a later stage of the supply chain

Question 34

Conglomerate merger

Answer 34

a merger between firms producing different products

Question 35

Internal economies of scale

Answer 35

lower long-run average costs resulting from a firm growing in size

Question 36

External economies of scale

Answer 36

lower long-run average costs resulting from an industry growing in size

Question 37

Internal diseconomies of scale

Answer 37

higher long-run average costs resulting from a firm growing in size

Question 38

External diseconomies of scale

Answer 38

higher long-run average costs resulting from an industry growing in size

Question 39

Total cost

Answer 39

the total amount that has to be spent on the factors of production used to produce a product

Question 40

Average total cost

Answer 40

total cost divided by output

Question 41

Fixed costs

Answer 41

costs which do not change with output in the short run

Question 42

Average fixed cost

Answer 42

total fixed cost divided by output

Question 43

Variable cost

Answer 43

costs that change with output

Question 44

Average variable cost

Answer 44

total variable cost divided by output

Question 45

Price

Answer 45

the amount of money that has to be given to obtain a product

Question 46

Total revenue

Answer 46

the total amount of money received from selling a product

Question 47

Average revenue

Answer 47

the total revenue divided by the quantity sold

Question 48

Profit satisficing

Answer 48

sacrificing some profit to achieve some goals

Question 49

Profit maximisation

Answer 49

making as much profit as possible

Question 50

Market structure

Answer 50

the conditions which exist in a market, including the number of firms

Question 51

Competitive market

Answer 51

a market with a number of firms that compete with each other

Question 52

Monopoly

Answer 52

a market with a single supplier

Question 53

Barrier to entry

Answer 53

anything that makes it difficult for a firm to start producing the product

Question 54

Barrier to exit

Answer 54

anything that makes it difficult for a firm to stop producing the product

Question 55

Scale of production

Answer 55

the size of production units and the methods of production used