Theme 3

Question 1

What is business growth?

Answer 1

The expansion of a firm’s operations, typically measured by revenue, market share, or output.

Question 2

What is internal (organic) growth?

Answer 2

Growth from within the business, such as increased sales or investment.

Question 3

What is external growth?

Answer 3

Growth through mergers or takeovers.

Question 4

What is a merger?

Answer 4

When two firms join together to form one.

Question 5

What is a takeover (acquisition)?

Answer 5

When one firm buys another.

Question 6

What is horizontal integration?

Answer 6

Merger/takeover of firms in the same industry and stage of production.

Question 7

What is vertical integration?

Answer 7

Merger/takeover of firms at different stages of the production process (can be forward or backward).

Question 8

What is conglomerate integration?

Answer 8

Merger/takeover between firms in unrelated industries.

Question 9

What are demergers?

Answer 9

When a firm sells off or splits a part of its business.

Question 10

What is profit maximisation?

Answer 10

When a firm aims to make the largest possible profit (where MC = MR).

Question 11

What is revenue maximisation?

Answer 11

When a firm maximises sales revenue (where MR = 0).

Question 12

What is sales maximisation?

Answer 12

Selling as much as possible without making a loss (AR = AC).

Question 13

What is satisficing?

Answer 13

Aiming for a satisfactory level of profit rather than maximising.

Question 14

What is total revenue (TR)?

Answer 14

Price × Quantity sold.

Question 15

What is average revenue (AR)?

Answer 15

Total revenue ÷ Quantity.

Question 16

What is marginal revenue (MR)?

Answer 16

The additional revenue from selling one more unit.

Question 17

What is total cost (TC)?

Answer 17

Fixed cost + Variable cost.

Question 18

What is average cost (AC)?

Answer 18

Total cost ÷ Quantity.

Question 19

What is marginal cost (MC)?

Answer 19

The cost of producing one more unit.

Question 20

What are fixed costs?

Answer 20

Costs that do not change with output (e.g. rent).

Question 21

What are variable costs?

Answer 21

Costs that vary with output (e.g. raw materials).

Question 22

What are economies of scale?

Answer 22

Falling long-run average costs as output increases.

Question 23

What are internal economies of scale?

Answer 23

Cost savings within the firm (e.g. managerial, technical).

Question 24

What are external economies of scale?

Answer 24

Cost savings due to industry growth (e.g. better infrastructure).

Question 25

What are diseconomies of scale?

Answer 25

Rising long-run average costs as output increases.

Question 26

What is normal profit?

Answer 26

The minimum level of profit needed to keep resources in their current use (AR = AC).

Question 27

What is supernormal profit?

Answer 27

Profit above normal profit (AR > AC).

Question 28

What is a loss?

Answer 28

When total costs exceed total revenue.

Question 29

What is perfect competition?

Answer 29

A market with many buyers and sellers, identical products, perfect information, and no barriers to entry.

Question 30

What is monopolistic competition?

Answer 30

one firm dominates the entire market, offering a unique product with no close substitutes and high barriers to entry for new competitors

Question 31

What is an oligopoly?

Answer 31

A market dominated by a few large firms, interdependence, and significant barriers to entry.

Question 32

What is a monopoly?

Answer 32

A market with one dominant seller (legally >25% market share).

Question 33

What are barriers to entry?

Answer 33

Obstacles that make it difficult for new firms to enter a market.

Question 34

What is a price taker?

Answer 34

A firm that must accept the market price.

Question 35

What is a price maker?

Answer 35

A firm with the power to set prices.

Question 36

What is a contestable market?

Answer 36

A market where firms can enter and leave freely, even if there are few actual competitors.

Question 37

What are sunk costs?

Answer 37

Costs that cannot be recovered if a firm exits the market.

Question 38

What is the profit maximisation condition?

Answer 38

MC = MR

Question 39

What is the revenue maximisation condition?

Answer 39

MR = 0

Question 40

What is the sales maximisation condition?

Answer 40

AC = AR

Question 41

What is the satisficing condition?

Answer 41

Achieving a satisfactory level of profit rather than the maximum.

Question 42

What is the principal-agent problem?

Answer 42

When the goals of owners (principals) and managers (agents) diverge.

Question 43

What is derived demand?

Answer 43

demand for a factor of production or good that arises from the demand for another good or service

Question 44

What is the wage rate?

Answer 44

The price of labour.

Question 45

What is marginal revenue product (MRP)?

Answer 45

The additional revenue generated by employing one more worker.

Question 46

What is labour productivity?

Answer 46

Output per worker per time period.

Question 47

What is labour supply?

Answer 47

The number of people willing and able to work at different wage rates.

Question 48

What is wage elasticity of demand?

Answer 48

Responsiveness of labour demand to a change in the wage rate.

Question 49

What is wage elasticity of supply?

Answer 49

Responsiveness of labour supply to a change in the wage rate.

Question 50

What is a monopsony?

Answer 50

A market with one buyer of labour (e.g. NHS as sole employer of doctors).

Question 51

What is a trade union?

Answer 51

An organisation that represents workers and seeks to improve pay and conditions.

Question 52

What is a minimum wage?

Answer 52

A legal minimum price for labour.

Question 53

What is the national minimum wage?

Answer 53

A statutory minimum wage set by the government.

Question 54

What is a maximum wage?

Answer 54

A legal limit on how much can be paid to certain workers.

Question 55

What is income tax?

Answer 55

A tax on individuals’ earnings.

Question 56

What are subsidies for training?

Answer 56

Government payments to encourage firms to train workers.

Question 57

What is trade union legislation?

Answer 57

Laws that restrict or support union activity.

Question 58

What is discrimination in the workplace?

Answer 58

When workers are treated unfairly based on characteristics like gender, race, etc.

Question 59

What is geographical immobility?

Answer 59

When workers find it hard to move locations for jobs.

Question 60

What is occupational immobility?

Answer 60

When workers lack the skills needed for new jobs.

Question 61

What is labour market failure?

Answer 61

When the labour market does not allocate resources efficiently, e.g. due to immobility or discrimination.