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Matthew Mavin-Economics unit 3

Firms
· A firm is a production unit. It transforms resources into goods and services
· "Industry" is used to describe a collection of firms operating in the same production
process
How do firms grow?
· Firms can grow by expanding the scale of their operations…

Page 3

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is known as a sunk cost

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Page 5

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Matthew Mavin-Economics unit 3
· Technical barriers
- Few large firms may dominate due to sixe - They use existing expertise and economies of
scale to ensure they operate at the
lowest possible average cost and new firms entering the market will find it impossible to
compete.
Niche-market business
·…

Page 6

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Page 7

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Matthew Mavin-Economics unit 3
Why do some firms break up?
· Some firms may grow too large and experience diseconomies of scale. As a result of the
growth of output, the business and managers may lost focus and control over day to day
management of the firm and therefore long-run…

Page 8

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Change in Q) Output Total cost Marginal cost 0 £100 ----- 1 £119 £19 2 £135 £16

Page 9

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Page 10

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Increasing returns to a fixed factor
Matthew Mavin-Economics unit 3
· Marginal costs always foes through the minimum point of the average variable cost and
average total cost curves
· If MC > AC then AC must be rising
· If AC > MC then AC must be falling
·…

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Pages in this set

Page 1

Preview of page 1

Page 2

Preview of page 2
Matthew Mavin-Economics unit 3

Firms
· A firm is a production unit. It transforms resources into goods and services
· "Industry" is used to describe a collection of firms operating in the same production
process
How do firms grow?
· Firms can grow by expanding the scale of their operations…

Page 3

Preview of page 3
is known as a sunk cost

Page 4

Preview of page 4

Page 5

Preview of page 5
Matthew Mavin-Economics unit 3
· Technical barriers
- Few large firms may dominate due to sixe - They use existing expertise and economies of
scale to ensure they operate at the
lowest possible average cost and new firms entering the market will find it impossible to
compete.
Niche-market business
·…

Page 6

Preview of page 6

Page 7

Preview of page 7
Matthew Mavin-Economics unit 3
Why do some firms break up?
· Some firms may grow too large and experience diseconomies of scale. As a result of the
growth of output, the business and managers may lost focus and control over day to day
management of the firm and therefore long-run…

Page 8

Preview of page 8
Change in Q) Output Total cost Marginal cost 0 £100 ----- 1 £119 £19 2 £135 £16

Page 9

Preview of page 9

Page 10

Preview of page 10
Increasing returns to a fixed factor
Matthew Mavin-Economics unit 3
· Marginal costs always foes through the minimum point of the average variable cost and
average total cost curves
· If MC > AC then AC must be rising
· If AC > MC then AC must be falling
·…

Comments

No comments have yet been made