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ECONOMICS > 1.2 Business Economics > Flashcards

1.2 Business Economics Flashcards

1
Q

What is a monopoly

A

A monopoly is a situation where there is one dominant seller in the market

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2
Q

what is a natural monopoly

A

A natural monopoly is a situation that occurs when one firm is able to server the industry at a lower cost than lots of small firms

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3
Q

What are the features of a monopoly

A

Price makers
Niche product
High barriers to entry
One firm dominates the market

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4
Q

what are the advantages of a monopoly and expand where necessary

A
  • Innovation - lots of money going into one firm means lots can go into innovation
  • Economies of scale
  • Efficiency - with multiple firms, there can be wasteful duplications of resources
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5
Q

what are the disadvantages of a monopoly

A
  • restricted choice for consumer - leads to higher pices and potential exploitation for consumer
  • Inefficiency - no incentives to keep costs down
  • lack of innovation - no incentives
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6
Q

What is a barrier to entry?

A

obstacles at discourage a firm from entering the market

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7
Q

list some barriers to entry

A
  • patents
  • legal barriers - government contracts with monopolies
  • technology
  • high start-up costs
  • high marketing budjet
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8
Q

What are factors influence firm growth

A
  • Economies of scale
  • reducing risk - if a business has multiple shops it wont destroy the business if one goes down
  • desire to take over competitors
  • already have acess to large amounts of finance
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9
Q

What are factors that influence firms to stay small

A
  • diseconomies of scale
  • aims of the entrepreneur
  • government regulations - government doesn’t want the chance of a monopoly
  • size of the market - no need to expand in a very luxurious market where there will always be limited demand
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10
Q

what are some advantages of small firms and expand where necessary

A
  • Flexibility - easier to make changes
  • lower wage costs - workers in small firms most likely aren’t in trade unions and can’t negotiate wage as much
  • better communication
  • personals services
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11
Q

what are some disadvantages of small firms and expand where necessary

A
  • cannot exploit economies of scale - higher costs
  • difficulty attracting quality staff
  • vulnerability
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12
Q

what are some advantages of large firms and expand where necessary

A
  • Economies of scale
  • Market domination - leads to higher profile in public eye
  • less vulnerability
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13
Q

What are some disadvantages of large firms and expand where neccessary

A

FINISH

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14
Q

What is economies of scale

A

Economies of scale are the cost advantages a company faces as it expands. the average cost decreases

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15
Q

What is diseconomies of scale

A

Economies of scale are the cost disadvantages a company faces as it expands. the average cost increases

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16
Q

What are the two types of economies of scale and describe them

A
  • Internal economies of scale - cost benefits an individual firm can benefit form when it expands
  • external economies of scale - cost benefits for all firms in an industry when the industry expands
17
Q

What are all internal economies of scale and expand where neccessary

A
  • Bulk buying - Firms that buy lots of resources get them at cheaper rates
  • Marketing - advertisement comes at a fixed cost, so its more efficient when it can be spread over more units of output
  • technical - larger factors are often more efficient than smaller ones
  • financial - banks are more likely to lend money to large firms
  • risk bearing - large firms have deep pockets so they can take risks
  • Managerial - can hire managers and more specialized workers
18
Q

What are all external economies of scale and expand where necessary

A
  • Skilled labor - as the industry grows, there will be more skilled workers, so companies can offer lower salaries
  • better infrastructure
  • access to suppliers - established industries encourage suppliers to set up nearby
19
Q

What are all diseconomies of scale and expand where necessary

A
  • lack of communication
  • lack of control
  • reliance/too much bureaucracy - too much time filling reports
20
Q

what is wage rate

A

the wage rate is the amount of money paid to workers for their services over a period of time

21
Q

what is a boom

A

a boom is a large increase in business activity

22
Q

what is a bust

A

A bust is a large decreases in business activity

23
Q

What is wage determination

A

wage determination is the equilibrium between supply and demand for labour

24
Q

Describe and explain the demand for labour graph

A

A graph that shows the relationship between wage rate and availability of workers. the line shows an inverse relationship.

This is because with a higher wage rate, the company cannot afford an abundance of workers

25
Q

What are factors affecting the demand for labour

A
  • availability of substitutes - with new and improved technology, workers are less valuable
  • other employment costs - E.G healthcare
  • Demand for product - demand for labour is a derived demand
  • productivity of labour - if workers are exceeding the levels of output, they’re more valuable
26
Q

Describe and explain the supply of labor graph

A

A graph that shows the relationship between wage rate and quantity of workers available. the line shows a positive correlation.

this is because more workers are willing to take a job that pays more money.

27
Q

what are factors affecting supply for labour

A
  • population size
  • age distribution
  • female participation
  • skills and qualifications
  • School leaving & retirement age
  • migration -some countries promote immigration for more workers
28
Q

What is the importance of quality & quantity of labour to businesses

A

FINISH

29
Q

What is the division of labour

A

division is labour is the breaking down of the production process into small pats with each worker allocated apecific task

30
Q

What are the advantages of division of labor and expand where necessary

A
  • Improved efficiency - as workers specialize they perform tasks quicker and more accurately
  • reduced production time - less time moving from one place to another
  • improved organization of product
  • more specialist tools available - leads to improved efficiency
31
Q

What are some disadvantages of the division of labor and expand where necessary

A
  • tasks become repetitive and boring - reduced productivity
  • loss of flexibility in the workplace
  • potential problems if one stage is disrupted - reduced productivity
32
Q

What is a trade union

A

a trade union is an organization representing people working in a particular industry or profession that protects their rights

33
Q

What are common aims of trade unions

A
  • negotiate pay & working conditions with employees
  • provide legal protection for workers- E.G discrimination
  • pressure the government to introduce regulations that improve the rights of employees
  • provide financial benefits such as strike pay
34
Q

what are the effects of trade unions

A
  • Successful trade unions will be able to force wage rates up in markets. however, companies will struggle to handle these new wage costs and lay off workers as a result
  • the strikes caused by some trade unions can significantly disrupt economic activity. this can also be dangerous in areas such as healthcare.

ECONOMICS (4 decks)

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