Karteikarten
[Econs] Firms & Decisions
Karten in diesem Stapel (23)
- 1Total Fixed Cost (TFC)costs that do not vary with outputs and costs exist even when output is 0. e.g: lease payments and rentals
- 2Total Variable Cost (TVC)costs that vary positively with output and such costs will be zero if output is zero. e.g: wages for hiring workers and cost of raw materials
- 3Internal economies/diseconomies of scalerefer to a fall/rise in unit cost of production when the firm increases output by expanding its scale of production
- 4List all the Internal Economies of Scale1. Technical: Specialisation & Division of Labour, Indivisibilities, R&D
2. Marketing Economies: Bulk Purchase, Large Scale Advertising
3. Administrative and Managerial
4. Financial
5. Risk Bearing - 5List all internal diseconomies of scaleManagement Difficulties
- prob in coordination and communication
- low morale - 6External economies/diseconomies of scalerefers to a fall/rise in unit cost of production experienced by the firm as a result of growth in the industry
- 7List all external economies of scale1. Economies of concentration: Trained Workforce, Better infrastructure
2. Economies of Information
3. Economies of disintegration - 8List all external diseconomies of scale1. Higher input of prices
2. increased strain on infrastructure - 9Minimum Efficient Scale (MES)occurs at the output level where LRAC first stops falling. it corresponds to the lowest point on the LRAC.
- 10Accounting ProfitTR - TC, where TC is the firms explicit costs only
- 11Economic ProfitTR-TC, where TC is the sum of the firms explicit and implicit cost
- 12Profit Maximisationachieved at the level of output where the addition to the total revenue from the sale of the last unit is equal to the addition to total cost of producing it. MR = MC
- 13Allocative efficiencydefined as the allocation of resources to produce the combination of goods and services most wanted by the society. This is achieved when P=MCA
- 14Explain Allocative EfficiencyP > MC: consumer values the additional unit of good more than the resources required to produce it, net gain in social welfare if additional unit is produced
P < MC: value that the consumer places on the additional unit of good is worth less than the opportunity cost of producing it, society better off with additional unit not produced - 15Productive efficiencyproduction of goods and services at the lowest possible average costs of production
- 16Productive Efficiency for firm vs society?Firm: produced at the lowest possible average costs = all points on the LRAC are productive efficient
Society: min of LRAC curve where all internal economies of scale have been exploited - 17Dynamic Efficiencysituation where firms are technologically progressive in order to reduce the average cost of production and/or meet the changing needs and wants of consumers over time.
- 18Characteristics of Perfect Competition1. Many small firms & competitors
2. Complete freedom of entry
3. Homogenous product
4. Perfect Knowledge - 19Impact of Perfect CompetitionEfficiency: YES to productive & allocative efficiency, NO to dynamic efficiency
Equity: YES as fairly distributed, NO because there may be considerable pre-existing inequality of income
Consumer Welfare: YES: consumer sovereignty - determine what and how much to be produced + choice of many consumers, NO because lack of variety, undifferentiated products + no pressure as no competition - 20Monopolysingle supplier of a product or service for which there are no close substitutes. As it is the only seller, the firm is also the industry.
- 21Characteristics of Monopoly1. Single Seller
2. Unique Product
3. Imperfect knowledge of product
4. High barrier to entry & exit - 22Define Barriers to entryobstacles that prevent new firms from entering a market to compete with the existing firms.
- 23Ways for Barriers to entry1. Substantial internal economies of scale
2. Control of essential raw materials or wholesale/raw outlets
3. Legal Barriers (e.g: patent, copyright, license)
4. Brand loyalty
5. Other tactics e.g: predatory pricing (selling below marginal cost to drive out competitors)
Informationen
- Beschreibung
- Year 6 Economic and Public Affairs (EPA) Karteikarten am [Econs] Firms & Decisions, erstellt von Alys Chia am 03/05/2017.
- Erstellt von
- Alys Chia
- Aufrufe
- 13
- Bewertung