Knowledge check list unit 3 economics.

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  • Created on: 22-01-13 08:00
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A form, is a unit of production; it is the process by which
factors of production are transformed into goods and services
An industry is all the firms producing the same kind of output
Profitability is a fairly un reliable measure of size, although
many large firms do make a large percentage of profit
Best way of measuring the size of a firm is sales revenue as a
percentage of the market
Shareholders car most about the profitability and the likelihood
that share prices will rise
Managers often care deeply about the size of the firm as it
correlates with the respect they feel they deserve and the
future chances of further promotions
AR=P means the price = the demand = allocatively efficient
Profit maximising firms produce where MC=MR
Once reached MC=0 they cannot increase their profit any
further so they stop producing any more than it currently is- it
keeps the amount of items produced at the same level
If a firm has stock left over at the day and it is going to pass
its sell by date, to slash prices is a rational policy
In the short run, as long as a firm covers its AVC it will make a
contribution to its fixed costs.
Normal profit is just enough profit to keep factors of
production in their current use
Collusion is illegal but tacit collusion is particularly hard to
A contestable market has low barriers to entry or exist and
behaves in response to the threat of competition itself
Fear of being detected might as a deterrent to
anti-competitive behaviour so the authorities might have more
effect than they seem to on paper BUT it might but that the
competition abuse may behaviour to prove
X represent the average efficiency savings that the firm is
expected to make a hence reflect in price cuts

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