Unit 6.1 and 6.2 Flashcards
Why do we import
Labour costs
Specialisation
Cost of raw materials
Production costs
T or F Fri a are major actors in the economy
True
What does a firm do
Employs people
Purchases inputs and produces goods and services
Sets prices greater than cost of production for profit
What is division of labour
Specialisation of producers to carry out different tasks during production
How is power concentrated in firms
In the hands of the owner or managers and allows them to issue commands to workers
How is power decentralised in markets
Buyers and sellers decisions are autonomous and voluntary
What is the chain of command
Hierarchy within firm
Directors
Manager
Workers
What is asymmetric information
Flow of information where one person knows more than the other
What is a contract
Legal document or understanding that specifies a set of actions that parties to the contract must undertake
How do contracts differ between markets and firms
Contracts for products sold in market permanent transfer ownership
Contracts for labour in firms have temporarily transfer authority over persons activity
How do firms and markets differ in social interactions
In markets interactions are short as buyers shop around
In firms relationships are long term
What are firm specific assets
Technical and social skills and friendships
What are some conflicting interest
Owners want greater profits
Managers want to maximise managerial salaries
Workers want to increase salaries
What type of ownership control is seen in small enterprises
Owners usually managers in charge of day to day running of the business
What type of ownership is seen in large enterprises
Owner not in everyday
Owner hires managers
Separate ownership and control of business
