Economics Unit 3 deffinitions

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Profit maximisation
MC=MR
1 of 28
Revenue maximisation
MR = 0
2 of 28
Sales maximisation
Producing at AC=AR and making only normal profit with the objective of increasing market share or preventing entry of new firms, or highest output at which TC = TR is achieved
3 of 28
Satisficing
achieving a balance between profit and revenue maximisation, based on the relevant power of the stakeholder groups
4 of 28
Vertical integration
A merger between two firms in the same Industry at different stages of production
5 of 28
Backward vertical integration
A merger between two firms in the same Industry at different stages of production. Merging with a firm nearer the start of the production process.
6 of 28
Forward vertical integration
A merger between two firms in the same Industry at different stages of production Merging with a firm nearer to the consumer.
7 of 28
Horizontal integration
merging of two firms in the same industry and the same stage of the production process
8 of 28
Conglomerate integration
merging of two firms in different industries with no obvious connection
9 of 28
Demerger
separation of a previously merged firm
10 of 28
Total revenue
P x Q
11 of 28
Average revenue
TR / Q
12 of 28
Marginal Revenue
change in TR/ change in Q
13 of 28
Total cost
TFC + TVC
14 of 28
Fixed Costs
costs that do not vary with output
15 of 28
Variable Costs
costs that vary directly with output
16 of 28
Average total cost
TC / Q
17 of 28
Average fixed cost
TFC / Q
18 of 28
Average variable cost
TVC / Q
19 of 28
Marginal cost
change in TC / change in Q
20 of 28
Marginal cost
change in TC / change in Q
21 of 28
The law of diminishing returns
when additional amounts of a variable factor are applied to a fixed quantity of a fixed factor eventually marginal product and average product will fall. [so MC and AC will rise]
22 of 28
Economy of Scale
reduction in LRAC due to an increase in size of the firm
23 of 28
Diseconomy of Scale
increase in LRAC due to an increase in size of the firm
24 of 28
Productive Efficiency
lowest point on AC curve (where AC = MC)
25 of 28
Allocative Efficiency
P = MC (where MC cuts AR)
26 of 28
Dynamic Efficiency
an improvement in efficiency in the long run
27 of 28
X-inefficency
where a firm allows costs to drift above the efficient point due to managerial slack
28 of 28

Other cards in this set

Card 2

Front

MR = 0

Back

Revenue maximisation

Card 3

Front

Producing at AC=AR and making only normal profit with the objective of increasing market share or preventing entry of new firms, or highest output at which TC = TR is achieved

Back

Preview of the back of card 3

Card 4

Front

achieving a balance between profit and revenue maximisation, based on the relevant power of the stakeholder groups

Back

Preview of the back of card 4

Card 5

Front

A merger between two firms in the same Industry at different stages of production

Back

Preview of the back of card 5
View more cards

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