3.1 - Small Firm Survival

Question 1

Why do small firms tend to survive?

Answer 1

Act as supplier/sub-contractor
Low PED and high YED
Avoid internal Diseconomies of scale
Lifestyle enterprise
Responsiveness to changing markets
External economies of scale

Question 2

How does acting as a supplier aid small firm survival?

Answer 2

Outlet for output
Relative price control

Question 3

How do PED and YED compliment small firm survival?

Answer 3

Low PED
High YED
High prices + profit margins
Brand loyalty given high income

Question 4

How does diseconomy avoidance aid small firm survival?

Answer 4

Low LRAC
Stable unit costs
Avoids internal diseconomies

Question 5

How does lifestyle enterprise aid small firm survival?

Answer 5

Owners aim to satisfice
Not profit maximising

Question 6

How do external EoS aid small firm survival?

Answer 6

Industry growth
Compliments diseconomy avoidance