1.2 Business Economics :Unit 17 - Unit 21 Flashcards
(46 cards)
1
Q
- What do you mean by “scale”?
A
size of the business.
2
Q
- What is economies of scale?
A
it is the falling in average costs due to expansion.
3
Q
- What is diseconomies of scale?
A
- rising average costs when a firm becomes too big.
4
Q
- What is internal economies of scale?
A
cost benefits that an individual firm can enjoy when it expands.
5
Q
- What are the 7 types/ reasons for economies of scale?
A
- Purchasing economies.
- Marketing economies.
- Technical economies.
- Financial economies.
- Managerial economies.
- Risk-bearing economies.
6
Q
- What is bulk buying?
A
- buying goods in large quantities, which is usually cheaper than buying in small quantities.
7
Q
- What is external economies of scale?
A
- cost benefits that all firms in an industry can enjoy when the industry expands.
8
Q
- What are the 4 reasons to external economies of scale?
A
- Skilled labor
- Infrastructure
- Access to suppliers
- Similar business in the area.
9
Q
- What are the 4 reasons to diseconomies of scale?
A
- Bureaucracy.
- communication problems.
- Lack of control.
- Distance between senior staff and shop floor workers.
10
Q
- What is competition?
A
- rivalry that exists between firms when trying to sell goods to the same group of customers.
11
Q
- What are the barriers to entry?
A
- obstacles that might discourage a firm from entering a market.
12
Q
- What are 5 common features to competitive markets?
A
- large number of buyers and sellers.
- products sold by each firm are close substitutes for each other.
- Low barriers to entry
- Almost no control over price charged.
- Free flow of information about the nature of products.
13
Q
- How do firms compete with other competitors in the markets?(4)
A
- keeping costs as low as possible.
- providing good quality products with high levels of customer services.
- charging prices that are acceptable to customers.
- Innovating by constantly reviewing and improving the product.
14
Q
- What do you mean by innovative?
A
commercial exploitation of a new invention.
15
Q
- What is production differentiation?
A
attempt by a firm to distinguish it product from that of rival.
16
Q
- What is the main disadvantage in competitive markets?
A
lower profit.
17
Q
- What are the 3 advantages of competition to consumers.
A
- Lower prices.
- More choice.
- Better quality.
18
Q
- What are the 2 disadvantages of competition to consumers?
A
- market uncertainty
- Lack of innovation
19
Q
- What are the advantages of competition to the economy?(3)
A
- Resources will be allocated more effectively in order to survive.
- They are more innovative.
- Better standard of living.
20
Q
- What are the disadvantages of competition to the economy?(2)
A
- Resources may be wasted due to factors of production may be immobile,
- People are made redundant.
21
Q
- Name 3 methods the size of a firm is measured.
A
- turnover
- Number of employees
- Balance sheet total(amount of money invested int he business)
22
Q
- Name 5 advantages to small firms.
A
- Flexibility.
- Lower wage costs.
- Personal service.
- Better communication
- Innovation
23
Q
- Name 4 disadvantages to being a small firm.
A
- higher costs.
- Lack of finance.
- difficult attracting quality staff.
- vulnerability.
24
Q
- Name 3 advantages to large firm.
A
- economies of scale.
- market domination.
- large-scale contracts.
25
26. Name 3 disadvantages to a large firm.
- too bureaucratic.
- coordination and control.
- poor motivation.
26
27. What are the 5 factors influencing the growth of firms?
- government regulation.
- access to finance.
- economies of scale.
- the desire to spread risk.
- the desire to take over competitors.
27
28. What is a market niche?
- smaller market, usually within a large market or industry.
28
29. What are 5 reasons a firm stays small?
- size of the market.
- nature of the market.
- Lack of finance.
- aims of the entrepreneur.
- diseconomies of scale.
29
30. What is a monopoly?
- monopoly is a situation where there is one dominant seller in a market.
30
31. What are the 4 features of a monopoly?
- one business dominates the market.
- unique product.
- price maker.
- barriers to entry.
31
32. What is a new entrant?
- company that starts to sell goods or services in a market where they have not sold them before or one of these goods or services.
32
33. What is price maker?
- where a dominant business is able to set the price charged in the whole market.
33
34. What are the 5 barriers to entry?
-legal barriers.
- patent.
- marketing budgets.
- technology.
- High start-up costs.
34
35. What are natural monopolies?
- situation that occurs when one firm in an industry can serve the entire market at a lower cost than would be possible if the industry were composed of many smaller firms.
35
36. What are the 3 advantages of monopoly?
- efficiency.
- innovation.
- economies of scale.
36
37. What are the 4 disadvantages of monopoly?
- higher prices.
- restricted choice.
- lack of innovation.
- inefficiency.
37
38. What are market segments?
groups of customers that share similar characteristics, such as age, income, interests and social class.
38
39. What is an oligopoly?
market dominated by a few large firms.
39
40. What are the 7 features of oligopoly?
- few firms.
- large firms dominate.
- different products.
- barriers to entry.
- collusion.
- non-price competition.
- price competition.
40
What is a collusion?
- informal agreements between firms to restrict competition.
41
41. What is interdependence?
where the actions of one country or large firm will have a direct effect on others.
42
42. What is a price war?
where one firm in the industry reduces price causing others to do the same.
43
43. What is a niche market?
market for a product or service, perhaps an expensive or unusual one, that does not have many buyers, but that may make good profits for companies that sell it.
44
44. What are the 5 advantages of oligopoly?
- choice.
- quality.
- economies of scale.
- Innovation.
- Price wars.
45
45. What is a cartel?
cartel is where a group of firms or countries join together and agree on pricing or output levels in the market.
46
46. What are the 2 disadvantages of oligopoly?
- Lack of choice.
- Pay a higher price due to restricted competitions.
