3.3

Question 1

Explain managerial economies of scale

Answer 1

Where senior managers can cover more output

Question 2

What does being in the long run mean

Answer 2

All factors of production are variable

Question 3

Draw long run perfect competition

Answer 3

Question 4

What does being in the short run mean

Answer 4

At least 1 fixed factor of production

Question 5

What are the conditions for perfect competition

Answer 5

Lots of small firms Undifferentiated products Price takers Symmetric information Low barriers to entry/ exit

Question 6

Explain risk bearing economies of scale

Answer 6

Large firms can diversify into new markets

Have something to fall back onto

Can cross subsidise as well

Question 7

What is average cost

Answer 7

Average cost per unit

Question 8

How does PED vary along the demand curve

Answer 8

Question 9

What is marginal revenue

Answer 9

Revenue earnt from selling one more

Question 10

Draw long run monopolistic competition

Answer 10

Question 11

Explain marketing economies of scale

Answer 11

Can spread to FC of marketing over a larger output

Question 12

Explain purchasing economies of scale

Answer 12

Getting a discount from buying a bulk quantity

Question 13

How do firms get diseconomies of scale

Answer 13

Demotivated workforce

Lack of communication

Ineffective management

Sloppy chain of command -> control

Question 14

Draw an MES diagram

Answer 14

Question 15

What are the conditions for monopolistic competition

Answer 15

Asymmetric information Differentiated products Price setting ability Low barriers to entry/ exit

Question 16

Draw an increase in internal economies of scale

Answer 16

Question 17

Explain financial economies of scale

Answer 17

Can raise finance easier, seen as less of a risk

Question 18

Explain diminishing marginal returns

Answer 18

When employing an extra unit of the variable starts to make the marginal productivity decrease , increasing marginal cost

You get less back than the previous unit gave

Question 19

What is average revenue

Answer 19

Average receipt per unit (PRICE)

Question 20

How can a lose making firm stay open in the SR

Answer 20

As long as the business is making enough to cover its day to day costs and make a contribution to its fixed costs then it should continue to operate.

Will allow time for staff to relocate or for demand for the good to pick up again

Question 21

Draw an increase in external economies of scale

Answer 21

Question 22

Explain diminishing average returns

Answer 22

When employing an extra unit of the variable starts to make the average productivity decrease , increasing avergage cost

You get less back than the previous unit gave

Question 23

What is diseconomies of scale

Answer 23

When output increases so does costs

Question 24

What is marginal cost

Answer 24

Cost of selling one more unit

Question 25

Name some external economies of scale

Answer 25

Governemnt investing in infrastructure

Joint ventures

Ancillary services setting up