Unit 3

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satisficing
making enough profits to keep shareholders happy while also balancing the objectives of other stakeholders such as profit maximising
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horizontal integration
occurs when 2 businesses in the same industry at the same stage of production become one
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vertical integration
acquiring a business in the same industry but at different stages of the production
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forward vertical
merging with a firm that is closer to the customer
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backward vertical
merging with a firm closer to the raw materials
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diversification
means reducing non-systematic risk by investing in a variety of assets
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conglomerate merger
means 2 firms merging which are in completely separate industries and markets
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fixed costs
are the costs that do not vary with output levels
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variable cost
are the costs that vary with output levels
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average fixed cost
TFC/TQ
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marginal cost
change in TC/ change in Q
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The law of diminishing marginal returns
the fall in marginal product as additional units of the variable factor of production are added to the fixed factors
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average variable cost
TVC/TQ
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average cost
TC/Q
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total cost
TVC + TFC
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Economies of scale
a fall in the LRAC of production as output rises
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Diseconomies of scale
a rise in the LRAC of production as output rises
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Minimum Efficient Scale of production
the output level at which lowest cost production starts
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total revenue
price x quantity
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average revenue
TR/QS
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marginal revenue
change in TR/ change in Q
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sales maximisation
means selling most possible volume without making a loss
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The profit maximisation output
occurs when MR=MC
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Other cards in this set

Card 2

Front

occurs when 2 businesses in the same industry at the same stage of production become one

Back

horizontal integration

Card 3

Front

acquiring a business in the same industry but at different stages of the production

Back

Preview of the back of card 3

Card 4

Front

merging with a firm that is closer to the customer

Back

Preview of the back of card 4

Card 5

Front

merging with a firm closer to the raw materials

Back

Preview of the back of card 5
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