eco topic 2 chap 5 (chap 4 in 1st topic oops)

Question 1

industry

Answer 1

collection of firms involved in making similar items usually competing w/ each other

Question 2

business firm

Answer 2

organisation using entrepreneurial skills to combine FOP t produce & sell g/s
-major production units in eco
-size, behaviour, performance influence overall productive capacity

Question 3

factors that may infleucne decision of investors & entrepreneurs in WHAT to produce (SDOC)

Answer 3

1. SKILLS & experience of business operator
2. industries w/ strong consumer DEMAND
3. business OPPORTUNITIES
4. amt. CAPITAL required to start business

Question 4

how do skills & experience of business operator influence WHAT to produce

Answer 4

likeliest successful operating in industry know well
-understand DEMANDS of consumers
-NATURE of production
-HOW to maintain QUALITY
-where they have PERSONAL CONTACTS

Question 5

how do industries with strong consumer demand affect WHAT to produce for entrepreneurs?

Answer 5

attracted to produce goods with significant UNTAPPED demand

Question 6

not on sheet

how do business OPP influence entrepreneurs in WHAT to produce?

Answer 6

particularly attracted to bus opp
-develop business might not otherwise have interest
-find niche market by focusing tastes of specific customers

Question 7

niche market

Answer 7

segment of mass market for g/s defined by specific tastes/characteristics of target customers

(specific target market)

Question 8

how does amount of capital required influence an entrepreneur’s decisions on WHAT to produce?

Answer 8

-access to capital is CONSTRAINT in start up
-likely attracted to business w/ lower start up costs (reduces barriers to entry & minimise risk)

Question 9

hwo do entrepreneurs decide how MUCH to produce?

Answer 9

assess level of consumer demand & its ability to convert demand into SALES (may commission market research)

Question 10

what happens when a firm produces too much?

Answer 10

-produce too much –> unsold goods require storage, waste –> financial burden for firm

Question 11

what happens when a firm produce too little?

Answer 11

-produce too little –> unable to offer goods will forgo potential sales to customers

Question 12

when is the question how MUCH to produce most difficult for a firm?

Answer 12

firm starts up/introduces new product line
-others generally able to anticipate market demand by observing past trends

Question 13

what odes the production process involve

Answer 13

combining range of resources (inputs) to create g&s (outputs)

Question 14

capital

Answer 14

manufactured products used to produce g&s aka ‘produced means of production’

Question 15

whwat does a firm’s decision about how to produce depend on?

Answer 15

relative efficiency of FOP which can change over time, choose combination of FOP most efficient

Question 16

what will a healthy, growing private sector generate?

Answer 16

higher rate of eco growth

stronger revenue base to fund services provided by GVT

Question 17

what do growing business contribute to?

not on sheet

Answer 17

reduce unemployment

regional development
-tourism
-better regional infras, improved liveability, population attraction & retention

increases eco’s PRODUCTIVE CAPACITY over time
-outward shift in PPF
-greater eco output, competition –> lower inflation –> improved living standards

Question 18

objectives firms usually pursue in daily operations GPMS

Answer 18

1. maximise growth
2. maximise profits
3. increase market share
4. satisficing behaviour

Question 19

firm objective to maximise growth

Answer 19

maximise growth rate of firm’s assets
-long run, larger asset base allow business achieve higher profits
-bring management other rewards (higher salaries)
-sometimes leads to business failure

Question 20

firms objective to increase market share

Answer 20

-profit maximisation not always highest priority (larger businesses generlaly split between owners (shareholders) & managers)
-instead may seek increase market share (% of sales business has in overall market)

Question 21

market share

Answer 21

measure of consumer preferences for business’ product over competitors
-higher market share –> more sales, competitive advantage

Question 22

profit motive

Answer 22

business seeks maximise PROFIT using LOWEST cost combination of resources & charging HIGHEST possible price

Question 23

satisficing behaviour

Answer 23

firms attempt pursue satsifactory level in ALL goals (profit & sales maximisation, etc) than maximising single goal.

Question 24

firms objective to maximise profits

Answer 24

maximise biggest possible profit/smallest possible loss main objective of most firms

profit : total revenue (output sold x price) deducted by total costs of production

Question 25

firm objectives satsificing behaviour instead of profit maximisation

Answer 25

-**excessive profits **may attract new competitiors into industry/provoke greater **regulatory** oversight -sometimes aim non-financial outcomes (**political influence, social prestige, environmental impact**)

Question 26

satisfactory level of profit

Answer 26

acceptable rate of retun on investment for shareholders

Question 27

firms objective to meet shareholder expectations

Answer 27

sometimes **conflicting** shareholder expectations -**RETAIL investors **may make investment decision based on bus' **environmental credentials/ethically** to meet, look **beyond** immediate **financial** expectations of shareholders, decisions on purpose & **future** -shareholders can **vote to change management & bus operations**

Question 28

retail investors

Answer 28

individuals who invest for themselves using brokerage/retirement accounts

Question 29

institutional investors

Answer 29

make investments on behalf of others with resources & specialised knowledge to research wide range of investment opportunities & can invest much larger amounts -superfunds & investment banks

Question 30

productivity

Answer 30

* increase output produced w/ given quantity of resources per unit of time * ^ production prop more than ^inputs

Question 31

how is productivity diff form production

Answer 31

production total g&s produced, ^amt resources used/work resources longer time

Question 32

productivity formula

Answer 32

total output/total input

Question 33

to increase productivity

Answer 33

increase production PROPORTIONATELY more than increase of inputs of resources

Question 34

5 how productivity improves standard of living (satisfy more wants) | WC&PIIC

Answer 34

1. **less WASTAGE of scarce RESOURCES** -produce more with given quantity of resources 2. **lower production COSTS & higher PROFITS** for bus firm -each FOP can produce more in given period, costs less to produce same quantity 3. **LOWER INFLATION** rate -lower production costs --> firms don't need to raise prices & can reduce 4. **higher INCOMES** -labour more productive, firms can pay better wage rates to workers without increasing prices 5. improved **international COMPETITIVENESS of AUS industries** -w/ foreign bus, **AUS goods more competitive on local & international markets**

Question 35

major way busienss firms can icnrease productivity

Answer 35

specialisation (FOP used more intensely for smaller no. production processes)

Question 36

how specialisation occurs in relation to 3 FOP

Answer 36

(specialisation of) land: LOCATION of INDUSTRY labour: DIVISION of labour capital: large-scale PRODUCTION

Question 37

division of labour (specialisation of labour)

Answer 37

businesses break down production process into no. sub-processes -labour specialise in certain part of process -avoid time & effort moving from one process to another each worker may complete small task in constructing each vehicle

Question 38

location of industry (specialsiation of land)

Answer 38

large no. businesses producing similar g&s CONGREGATE in SAME area to reduce production COSTS by sharing common infrastructure requirements

Question 39

large-scale production (specialisation of capital)

Answer 39

businesses grow so large can use highly-specialised capital equipment in production process

Question 40

internal economies of scale

Answer 40

cost saving advantages resulting from firm expanding its scale of operations when firm's output is below technical optimum need to achieve large scale of production to minimise costs

Question 41

economies of scale

Answer 41

average costs per unit of production fall as output size grows

Question 42

internal DISECONOMIES of scale

Answer 42

cost disadvantages (increase of marginal costs per unit) faced by firm after expanding its scale of operations **beyond certain point** output level ABOVE technical optimum

Question 43

what are most factors that cause diseconomies of scale

Answer 43

management problems as business grows size, management unable to organise all areas of business efficiently --> slowing production process & increasing costs

Question 44

6 cost saving advantages from internal economies of scale (firm expands scale of operations) SCRMDF

Answer 44

1. becoming larger, firm can take advantage of SPECIALISATION of labour -breaking up production process into different stages 2. large firm able to INVEST in CAPITAL equipment 3. can buy RAW MATERIALS in BULK -reduces per-unit cost of inputs -economies of SIZE 4. large firm can find MARKET for its by-products -small firm would have to discard as waste -furniture manufacturer sells timber to trophy manufacturer 5. put resources into R&D -expand new production lines -reduce per-unit costs in future -invest in HUMAN CAPITAL (improve skills of its labour force, tailoring to firms needs) 6. easier & cheaper to raise finance for BUSINESS EXPANSION

Question 45

4 disadvantages of internal DISeconomies of scale (cause per-unit production costs to increase once firm expands size past certain point)

Answer 45

1. MANAGEMENT inefficiency may increase 2. large firm may lead to duplication & paperwork 3. problems arise in workplace relations -management no longer knows staff personally -management increasingly unaware of issues faced by diff workers -increase tension in employer/ee relationship and become workplace disputes 4. decrease in managerial & administrative efficiency -overshadow advantage of large size -increase in per-unit production costs

Question 46

technical optimum

Answer 46

most efficient level of production for firm, average costs or production at lowest possible level

Question 47

what does the LRAC (long run average cost) curve look like and what relationship does it display?

Answer 47

production costs and INTERNAL dis/economies of scale output x-axis, cost per unit y-axis concave up parabola floating with vertex at technical optimum, internal DISecos of scale on RHS, vice versa

Question 48

what causes the LRAC to have a downward shift?

Answer 48

learning by doing (experience & practice) over time

Question 49

EXTERNAL economies of scale

Answer 49

advatanges for firm due to growth of INDUSTRY firm is operating in, regardless of firm's level of production NOT the result of firm changing OWN scale of operations

Question 50

LAC 3 external economeis of scale cost-saving advantages

Answer 50

1. increasing **LOCALISATION** of industry -**all firm**s in certain **region** enjoy certain cost-saving advantages -eg. locating highly populated area with supply of ***skilled labour*** & plentiful supply of** inputs **& **major consumer market** 2. industry **grows--> all firms** derive extra benefits -eg. **GVT/private enterprise **provide special **R&D** to promote industry 3. **growing, competitive CAPITAL market** benefit all firms -provide **cheaper INVESTMENT funds** from **variety **of sources

Question 51

external DISeconomies of scale

Answer 51

disadvantages faced by firm due to growth of industry firm/economy operates in. NOT result of firm changing own scale of operations

Question 52

PTR external diseconomies of scale

Answer 52

1. growth of industry --> ^ **POLLUTION** -illness, premature deaths, -closures of factories harmful effects on business 2.** ^ CONCENTRATION** of **industry** in **urban areas** cause **TRANSPORT BOTTLENECKS** -^ transport costs of all firms -eg. growth of tokyo high **property prices,** ppl move far and millions spend hrs travelling to work 3. industry grows, cost of firm's **RAW MATERIALS** rise -increasing **demand forces up price** -esp very limited supply of resources

Question 53

ethical decision making

Answer 53

business decisions about production **methods, employment,** etc made taking consideration **broader impacts on society & environment,** not simply *maximising profits* for firm

Question 54

7 implications tech change & ethical decision making have for business conduct PPEOTGE

Answer 54

1. PRODUCTION methods 2. PRICES 3. EMPLOYMENT 4. OUTPUT and PROFITS 5. types of PRODUCTS 6. GLOBALISATION 7. ENVIRO sustainability

Question 55

hwo do tech & ethics affect production methods?

Answer 55

-increased **productive capacity **of eco, use EXISTING resources efficiently -invest in tech varies, but mostly: l**ower costs, increased efficiency, reduction in workforce size,** possibility of **larger production runs**

Question 56

business ethics

Answer 56

going aboe & beyond *requirements of law *and taking account **social interests** in decision making -not just abiding by law, meeting **contractual obligations** & building **customer relationships**

Question 57

how does tech & ethics affect a firm's prices?

Answer 57

proliferation of **price comparisons** enable consumers to check prices offered by **many firms** selling g/s -squeezes **profit margins** -froces firms to **reduce costs & compete with overseas** competitors

Question 58

how does tech & ethics affect a firm's employment?

Answer 58

tech change made many **jobs redundant** -automation & AI **reduced demand for labour** -increased **competition of overseas** firms causes others to cut back **local manufacturing operations**/move them **offshore** --> AUS **job losses** HOW, new tech --> new job opp (**strong demand** for employees with **tech skills)** EDM affects employment starts **-under law**, all business must meet **equal employment opp** obligations in hiring new employees -ethical factors may encourage bus to further actively hire employees from **groups traditionally suffered** discrimination/disadvantage (women, disabled, etc)

Question 59

how does EDM and tech affect firm's output & profits

Answer 59

bus invest in tech able offer **better quality** products at **lower price** **adapt & respond to changes in MARKET DEMAND and CUSTOMISE output** to specific needs of marketplace -**increase demand** for their products --> higher output level & ^profitability sometimes tech fail to perform to expectation and **expensive to fix**/superseded by even better tech competitors invest in at lower price

Question 60

hoes does tech & edm affect firm's type of products

Answer 60

tech **expands range of products** to satisfy market demand -**creates new products & industries** -regularly **update **eg cars, phones -new production tech more **FLEXIBLE, can CUSTOMISE output** to specific wants -smaller production runs more affordable --> broaden range of products, easier to satisfy consumer demand EDM --> produce **environmentally conscious** g&s -plant based meat, plastic free packaging -draws ppl to run bus in ethically consumerist markets

Question 61

how does edm & tech affect globalisation of markets

Answer 61

tech facilitates emergence of a global market economy) -develop **global money & stock markets** possible for bus to **attract INVESTMENT funds globally** -individuals **diversify investments** -low cost communication allows info flow freely from overseas to consumers & bus --> make informed decision of production & consumption greater access to foreign markets, able to **source cheaper products** in economy with fewer regulations -forced labour overseas -very low wages -dangerous work environments -denial of right to join trade union & seek better pay for global eco, consumers & nonGVT orgs greater attention to HOW goods produced --> pressure businesses to improve practices of their subsidiaries & their suppliers

Question 62

how does tech & edm affect firm's enviro sustainability (minimise pollution & waste, preserve natural enviro, increase use of renewable energy)

Answer 62

sig driver of investment in new tech -bus change activities to become environmentally sustainble responding to: -consumer demands -new regulations/financial incentives from GVT -bus ethics value natural enviro affect WHAT g&s produced and HOW produced