Business Behavior

Question 1

Fixed costs:

Answer 1

Costs that never change- capital costs

Question 2

Variable costs:

Answer 2

Costs that will change on output- labour cost

Question 3

Characteristics of market structures:

Answer 3

No. Of suppliers
No. Of buyers
Price setters/ takers
Objectives
Barriers to entry or exit
Knowledge
Product

Question 4

Normal profit

Answer 4

The minimum level of profit required to keep factors of production in current use. Included in the cost.

Question 5

Super normal profit:

Answer 5

Anything above the normal profit

Question 6

Business costs:

Answer 6

Rent
Electricity
Labour
Machinery
Set up
Pension

Question 7

Total revenue =

Answer 7

Price X quantity

Question 8

Marginal revenue:

Answer 8

Revenue you get from selling ONE more

Question 9

Average revenue:

Answer 9

How much you receive on average per product sold. Total revenue / output

Question 10

Total revenue:

Answer 10

A firm maximises its revenue once marginal revenue = 0

Question 11

Marginal product:

Answer 11

The additional unit of OUTPUT( product) produced as a result of an additional unit of INPUT (labour)
E.g Input. Output
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Question 12

Diminishing Marginal Returns:

Answer 12

As inputs are increased the increase in output becomes less and less

Question 13

Business objectives:

Answer 13

Maximise profits
Maximise sales revenue
Maximise sales volume
Show concern for the environment
Achieve satisfactory objectives

Question 14

What can a business do to try and make as much profit as possible??

Answer 14

Lowering prices should encourage more people to buy your stock. This will increase the revenue gained.

Question 15

Why is making as much profit as possible important for a company??

Answer 15

This is their main objective and key for a business, also it is helpful to expand your business. Furthermore companies want to protect their market share.

Question 16

Why do some businesses prefer to stay small??

Answer 16

Not enough money
No opportunity
No knowledge
Lack of confidence
Family ties- geographical mobility 
Happy as they are

Question 17

Business efficiency:

Answer 17

The ability of the business to maximise its output and minimise its input.

Question 18

Productive efficiency:

Answer 18

Operating at the lowest point on the AC curve

Question 19

Allocative efficiency

Answer 19

Producing goods and services people want

Marginal benefit=Marginal cost (P=MC)

Question 20

X inefficiency

Answer 20

Not operating on the AC curve

Question 21

Dynamic efficiency

Answer 21

Long term allocation of resources. Firms are efficient due to investing in R and D

Question 22

Horizontal integration:

Answer 22

Same level of supply chain

This occurs when firms merge at the same stage of production. This will be done to measure the size of a firm.

Question 23

Vertical integration:

Answer 23

Behind or In Front of the supply chain
This occurs when a firm merge at different stages of production. There are two types of of vertical integration– backward and forward

Question 24

Backward integration:

Answer 24

This occurs when a firm merges with another firm which is nearer to the source of production. E.G a car manufacturer buying a steel manufacturer

Question 25

Forward integration:

Answer 25

This occurs when a firm merges closer to the customer. E.G a car manufacturer buying a car showroom.

Question 26

Internal growth:

Answer 26

Growing internally as a business (increasing sales)

Question 27

Conglomerate integration:

Answer 27

When two businesses with nothing in common join together.

Question 28

Economies of scale:

Answer 28

Reducing your AC by increasing output Increasing output spreads your Fixed and Varied costs over more products.

Question 29

Technical EOS

Answer 29

Spreading your capital costs over more products

Question 30

Managerial EOS

Answer 30

Recruiting specialist managers which increase efficiency

Question 31

Marketing EOS:

Answer 31

Spreading your marketing costs over more products.

Question 32

Purchasing EOS

Answer 32

Buying in bulk at a discount

Question 33

Financial EOS

Answer 33

Borrowing at a cheaper rate of interest

Question 34

Diseconomies of scale examples

Answer 34

``` Laziness Low morale Lack of supervision Poor communication Office policies ```

Question 35

Examples of external economies of scale:

Answer 35

The benefit to industry Communication Infrastructure Educated graduates

Question 36

Revenue maximisation and position on a graph

Answer 36

Bringing in as much revenue as possible. | Occurs when MARGINAL REVENUE= 0

Question 37

Reasons for Revenue Maximisation:

Answer 37

``` Keeps business going Pay debts Expansion Customer loyalty Expand market share ```

Question 38

Sales maximisation and position on a graph

Answer 38

Achieving the highest possible sales volume without making a loss Occurs where AC = AR/D