Theme 3 : Business behavior and the labor market

Question 1

Define Allocative efficiency?

Answer 1

When resources are allocated to the best interest of society, where there is maximum social welfare and utility so P=MC.

Question 2

Define asymmetric information?

Answer 2

Where one party has more info than other causing market failure and problems for regulators.

Question 3

Define Average cost/Average total cost?

Answer 3

The cost of production per unit

Question 4

Define Average revenue?

Answer 4

The price each unit is sold for.

Question 5

Define bilateral monopoly?

Answer 5

Where there is only one buyer and one seller in the market.

Question 6

Define cartels?

Answer 6

A formal unlawful agreement where firms enter into an agreement to mutually set prices.

Question 7

Define collusion?

Answer 7

This occurs when firms agree to work together

Question 8

Define competition policy?

Answer 8

gov action to increase competition in markets.

Question 9

Define competitive tendering?

Answer 9

Where the gov contracts out the provision of a good and invites firms to bid for the contract.

Question 10

Define conglomerate intregration?

Answer 10

The merger of firms with no common connection

Question 11

Define constant returns to scale?

Answer 11

Output increases by the same proportion that the inputs increase by.

Question 12

Define contestable market?

Answer 12

When there is threat of new entrants, forcing firms to be efficient.

Question 13

Define decreasing returns to scale?

Answer 13

An increase in inputs by a certain proportion will lead to output increasing by a smaller proportion.

Question 14

Define demergers?

Answer 14

A single business is broken into two or more businesses to operate on their own.

Question 15

Define deregulation?

Answer 15

The removal of legal barriers to allow private enterprise to compete in a previously protected market.

Question 16

Define derived demand?

Answer 16

The demand for one good is linked to the demand for a related good.

Question 17

Define diseconomies of scale?

Answer 17

The disadvantages that arise in large business that reduce efficiency and cause AC to rise.

Question 18

Define dynamic efficiency?

Answer 18

Efficiency in the long run; concerned with new tech and increases in productivity which causes efficiency to increase over a period of time.

Question 19

Define economies of scale?

Answer 19

The advantages of large scale production that enable a large business to produce at a lower AC than a smaller business.

Question 20

Define external economies of scale?

Answer 20

An Advantage which arises from the growth of the industry within which the firm operates, independent of the firm itself.

Question 21

Define fixed cost?

Answer 21

Costs which do not vary with output.

Question 22

Define profit business?

Answer 22

A business whose main aim is to make money.

Question 23

Define game theory?

Answer 23

Used to predict the outcome of a decision made by one firm; which has incomplete info about the other firm.

Question 24

Define geographical mobility of labor?

Answer 24

The ease and speed at which labor can move from one area to another.

Question 25

Define horizontal integration?

Answer 25

The merger of firms in the same industry at the same stage of production.

Question 26

Define increasing returns to scale?

Answer 26

An increase in inputs by a certain proportion will lead to an increase in output by a larger proportion.

Question 27

Define interdependent?

Answer 27

The actions of one firm directly affects another firm.

Question 28

Define internal economies of scale?

Answer 28

An advantage that a firm is able to enjoy because of growth.

Question 29

Define limit pricing?

Answer 29

when firms set prices too low in order to prevent new entrants.

Question 30

define loss?

Answer 30

when revenue does nor cover costs.

Question 31

define marginal cost?

Answer 31

the additional cost of producing one extra unit of good.

Question 32

define marginal revenue?

Answer 32

the additional revenue gained by selling one extra unit of good.

Question 33

Define maximum wage?

Answer 33

A ceiling wage which people cannot earn above.

Question 34

Define minimum efficient scale?

Answer 34

The lowest level of output necessary to fully exploit economies of scale.

Question 35

Define minimum wage?

Answer 35

A floor wage which people cannot earn below.

Question 36

Define monopolistic competition?

Answer 36

When there are large num of buyers and sellers who are relatively small and act independently.

Question 37

Define monopoly?

Answer 37

A single seller in the market.

Question 38

Define monopsony?

Answer 38

A single buyers in the market. e.g google

Question 39

Define N-firm concentration ratio?

Answer 39

The percentage of market share held by the 'n' biggest firms.

Question 40

Define nationalization?

Answer 40

When a private sector company or industry is brought under state control, to be owned and managed by the gov.

Question 41

Define natural monopoly?

Answer 41

Where economies of scale are so large that not a single producer is able to fully exploit them, it is more efficient for there to be a monopoly than sellers.

Question 42

Define non-collusive oligopoly?

Answer 42

When firms in an oligopoly compete against each other, rather than making agreement to reduce competition.

Question 43

Define non-price competition?

Answer 43

When firms competet CELL other than price | e.g-like customer service they will aim to increase the loyalty to the brand.

Question 44

Define normal profit?

Answer 44

The minimum reward required to keep entrepreneurs supplying their enterprise the return sufficient to keep cell to the business so tc=tr.

Question 45

Define non-for-profit business?

Answer 45

when firms are run i order to maximise social welfare and help individuals and groups.