Year 13 Micro 1 Flashcards

1
Q

Supernormal/ economic profit

A

Profit above normal

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2
Q

Average Cost

A

total cost/ output

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3
Q

Average Return

A

I.e productivity
amount of output produced per unit of a variable factor of production

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4
Q

Average Revenue

A

Total Revenue / quantity sold

Revenue per product sold

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5
Q

Backward Vertical merger

A

Acquisition of a business which is at an earlier stage of production in the same industry

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6
Q

Barriers to entry

A

Factors which make it harder/ expensive for new firms to enter a new market

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7
Q

Barriers to exit

A

Factors that make it more difficult/expensive for incumbent firms to leave a market

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8
Q

Capitalism

A

Economic system
Production controlled by the private sector
Operated in pursuit of profit

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9
Q

Conglomerate merger

A

A merger between 2 firms no common business interest

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10
Q

Constant returns to scale

A

An increase in the quality of all factors of production employed leads to a proportionate increase In output

10% more factor inputs
10% increase in output

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11
Q

Contestable market

A

Market free from barriers to entry/exit

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12
Q

Creative destruction

A

The process: barriers to entry are removed from a market
usually due to technological advancements
Allowing new firms to replace older ones
Creating new markets out of nothing

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13
Q

Decreasing returns to scale

A

Situation: increase in quantity of all factors of production employed leads to a less than proportionate decrease in output

10% more inputs
5% less output

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14
Q

Diminishing marginal returns

A

Increase In quantity or one variable input leads to a smaller increase in output than the addition of the previous unit

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15
Q

Diseconomies of scale internal

A

An increase in long run average costs arising from an increase in firm’s scale of operations

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16
Q

Diseconomies of scale external

A

An increase in long run average costs arising from an increase in the size of an industry

17
Q

Divorce between ownership and control

A

A scenario where the people who own a firm are not the same people that run it

Usually seen as the running of PLC by managers instead of shareholders

18
Q

EOS internal

A

Reduced long run average costs
Firms scale of operations increases

19
Q

Economies of scale (external)

A

Reduced long run average costs
Growth in industry

20
Q

External growth

A

Growth of firm
Through mergers and acquisitions (M&A)

21
Q

Fixed Costs

A

Costs that do not vary with output

22
Q

Forward vertical merger

A

Acquisition of a business that is at a later stage of production in the same industry

23
Q

Horizontal merger

A

Merger between 2 firms at the same stage of production in the same industry

24
Q

Increasing marginal returns

A

Increase in quantity of one variable input leads to a larger increase in output than the addition of the previous unit

25
Q

Increasing returns to scale

A

An increase in the quantity of all factors of production employed leads to a more than proportionate increase in output

26
Q

Innovation (product)

A

The exploitation of invention to create a product that can be marketed

27
Q

Internal/organic growth

A

Growth of a firm without merger & takeover

eg advertising

28
Q

Invention

A

Discovery of new technology through R&D

29
Q

Long run

A

Variable FOPS

30
Q

marginal cost

A

Change in total cost from making an additional unit

Change in total cost/ change in quantity sold

31
Q

Marginal returns

A

Change in total output from an addition unit of a variable factor of production

32
Q

Marginal revenue

A

Change in total revenue from an additional unit

33
Q

Minimum efficient scale of production

A

Smallest scale of production at which average cost is minimised

Lowest point on LRAC curve

34
Q

Normal profit

A

Just enough to cover opportunity cost of all FOPS being used in their current employment

35
Q

Principle agent problem

A

Scenario: managers chosen by shareholders act different: different incentives

36
Q

Process innovation

A

The exploitation of invention to create new ways of producing goods or services

37
Q

Short run

A

Fixed FOPS

38
Q

total return

A

Total output produced from a given quantity of a variable factor of production

39
Q

Zombie firm

A

Firm can continue operations without becoming insolvent but constrained by large debts that it may only be able to pay interest on.