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RWK Micro Flashcards

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1
Q

What are Economies of Scale?

A

Cost advantages that businesses obtain due to scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units.

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2
Q

How do airline industries achieve Economies of Scale?

A

Through bulk buying of fuels and planes.

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3
Q

What is the impact of Economies of Scale on Supermarkets?

A

They compete based on their ability to achieve the greatest Economies of Scale.

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4
Q

What is a key characteristic of the Big Six Energy Companies?

A

They have huge Economies of Scale that allow them to outcompete smaller rivals.

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5
Q

Define Diseconomies of Scale.

A

Increasing per-unit costs as a company grows too large, leading to inefficiencies.

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6
Q

What is an example of a company experiencing Diseconomies of Scale?

A

PepsiCo’s growth strategy through horizontal mergers leading to lack of coordination.

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7
Q

What is Profit Maximisation?

A

The process of increasing profits to the highest possible level.

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8
Q

Why do pharmaceutical companies aim for Profit Maximisation?

A

To cover R&D costs, which average $2 billion per new drug.

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9
Q

What strategy did Walmart adopt after a tax cut?

A

Increased wages for workers and bonuses for employers to enhance stakeholder satisfaction.

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10
Q

What is Revenue Maximisation?

A

Aiming to increase revenue rather than profit.

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11
Q

How did Twitter approach Revenue Maximisation?

A

By using large revenue to demonstrate business success to shareholders.

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12
Q

Define Sales Maximisation.

A

The strategy of increasing sales volume to build brand recognition and loyalty.

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13
Q

What is an example of a company focusing on Sales Maximisation?

A

Costa opening more stores to compete against Starbucks.

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14
Q

What does the term ‘Survival’ refer to in business?

A

A short-term objective to remain operational in a competitive environment.

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15
Q

What is Corporate Social Responsibility?

A

A business model that helps a company be socially accountable to itself, its stakeholders, and the public.

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16
Q

What is a characteristic of Perfect Competition?

A

Many buyers and sellers with homogenous goods and low barriers to entry.

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17
Q

What defines a Monopoly?

A

A market structure where a single seller controls the entire market.

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18
Q

What is an example of a Natural Monopoly?

A

Water companies due to high fixed costs and benefits from Economies of Scale.

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19
Q

What is Price Discrimination?

A

Charging different prices to different consumers for the same good or service.

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20
Q

What is an example of 1st degree Price Discrimination?

A

Amazon changing prices based on consumer browsing data.

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21
Q

What is Monopolistic Competition?

A

A type of market structure with many sellers offering slightly differentiated products.

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22
Q

What defines an Oligopoly?

A

A market dominated by a small number of firms.

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23
Q

What is Overt Collusion?

A

A formal agreement between firms to set prices or limit production.

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24
Q

What is Tacit Collusion?

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A

An implicit agreement among firms to coordinate prices without formal communication.

25
What are Contestable Markets?
Markets where entry and exit are easy, leading to potential competition.
26
What is the significance of Hit and Run behavior in markets?
Firms entering and exiting the market quickly to exploit short-term profits.
27
What are Price Caps in monopoly regulation?
Limits set on the prices that monopolies can charge consumers.
28
What is an example of Nationalisation?
The UK railways being planned for renationalisation by the Labour Party.
29
What is a Monopsony Employer?
A market situation where there is only one buyer for many sellers.
30
What are the characteristics of Inelastic Demand?
Demand that does not change significantly when prices change.
31
What is an example of Indirect Tax?
Fuel Duty in France aimed at increasing government revenue.
32
What is a Minimum Price policy?
Setting a lower limit on the price of a good or service.
33
What is the impact of the NMW?
The National Minimum Wage increased to £12.21 for those over 21.
34
What is Regulation in the context of government policies?
Rules set by authorities to control and guide market behavior.
35
What is the purpose of an Emissions Trading Scheme?
To reduce pollution by allowing firms to buy and sell emission allowances.
36
What is the NHS's funding model?
Free healthcare funded through tax revenue.
37
What is a Trade Union?
An organization that represents workers' interests and negotiates with employers.
38
What is the effect of Trade Union density on bargaining power?
Higher density can lead to more control over pay and working conditions.
39
What is the Employment Rights Bill?
Legislation aimed at improving job security and workers' rights.
40
What is the primary focus of risk taking in a business context?
Revenue maximisation and ignoring shareholder profit ## Footnote This approach can lead to short-term gains at the expense of long-term sustainability.
41
What significant change does the Employment Rights Bill introduce regarding zero-hour contracts?
Bans zero-hour contracts ## Footnote This aims to increase job security for workers.
42
What reforms does the Employment Rights Bill implement for trade unions?
* Easier process for joining trade unions * Reduced membership threshold * Removal of restrictions on trade union activity * Easier organisation of strikes ## Footnote These reforms strengthen trade union power.
43
How does the Employment Rights Bill aim to improve job security?
* Protects from unfair dismissal * Access to sick pay * Access to parental leave * Right to request to work from home * Right to disconnect after work ## Footnote These measures contribute to a greater work-life balance.
44
What are the potential impacts of the Employment Rights Bill on the labor market?
* Increase in supply of labour * Wage push inflation * Improvement in living standards * Structural unemployment due to automation or outsourcing * Unemployment from reduced hiring flexibility ## Footnote These impacts vary based on sector and firm capability.
45
What is a negative externality of production?
A cost that is suffered by a third party as a result of an economic transaction. ## Footnote Examples include environmental damage and public health issues.
46
What are the private and external costs associated with a water company dumping raw sewage?
* Private cost: Saved money by avoiding proper sewage treatment * External costs: Environmental damage, contaminated water, clean-up costs borne by taxpayers ## Footnote This behavior leads to significant public health risks.
47
What regulations were imposed on Thames Water for illegally discharging sewage?
Fined £3.3 million in 2023 ## Footnote Fines may be insufficient to change corporate behavior.
48
What is one proposed solution for addressing pollution from water companies?
Pollution tax per unit of waste dumped ## Footnote This aims to make polluters pay the true social cost of their actions.
49
What is a carbon tax?
An additional tax on fossil fuels, currently £18 per tonne ## Footnote It aims to incentivize businesses to reduce emissions.
50
What are the advantages of implementing a carbon tax?
* Incentive for businesses to reduce emissions * Encourages investment in renewable technology * Increases government revenue * Internalises external costs ## Footnote This approach aims to hold polluters accountable.
51
What is a disadvantage of a carbon tax?
Regressive impact on low-income individuals ## Footnote Higher energy prices may disproportionately affect those with lower incomes.
52
What is the annual amount of plastic packaging waste generated by UK households?
100 billion pieces ## Footnote This highlights the significant environmental impact of plastic waste.
53
What is the purpose of the Plastic Packaging Tax?
To impose a tax on packaging that doesn’t meet minimum recycling thresholds ## Footnote This aims to encourage eco-friendly production practices.
54
What does extended producer responsibility entail?
Producers cover costs of collecting, sorting, and recycling waste ## Footnote This encourages firms to reduce waste and hold them accountable for their packaging.
55
What is a positive externality of consumption in childcare?
Quality childcare improves educational outcomes and social skills ## Footnote This leads to a more productive workforce and long-term economic growth.
56
What is the external benefit of state provision of healthcare?
Improved public health outcomes and reduced pressure on emergency services ## Footnote Access to healthcare can lead to a healthier population.
57
What is the current tuition fee for university in the UK?
Rising to £9535 ## Footnote This fee is intended to be accessible for low-income individuals.
58
What are the characteristics of public goods?
Non-rival, non-excludable ## Footnote Private firms cannot profit from public goods, necessitating state provision.

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