Unit 3 0.0 / 5 ? EconomicsWhat objectives do firms have? Why do firms grow?A2/A-levelEdexcel Created by: soniawangCreated on: 28-09-14 22:50 satisficing making enough profits to keep shareholders happy while also balancing the objectives of other stakeholders such as profit maximising 1 of 23 horizontal integration occurs when 2 businesses in the same industry at the same stage of production become one 2 of 23 vertical integration acquiring a business in the same industry but at different stages of the production 3 of 23 forward vertical merging with a firm that is closer to the customer 4 of 23 backward vertical merging with a firm closer to the raw materials 5 of 23 diversification means reducing non-systematic risk by investing in a variety of assets 6 of 23 conglomerate merger means 2 firms merging which are in completely separate industries and markets 7 of 23 fixed costs are the costs that do not vary with output levels 8 of 23 variable cost are the costs that vary with output levels 9 of 23 average fixed cost TFC/TQ 10 of 23 marginal cost change in TC/ change in Q 11 of 23 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 12 of 23 average variable cost TVC/TQ 13 of 23 average cost TC/Q 14 of 23 total cost TVC + TFC 15 of 23 Economies of scale a fall in the LRAC of production as output rises 16 of 23 Diseconomies of scale a rise in the LRAC of production as output rises 17 of 23 Minimum Efficient Scale of production the output level at which lowest cost production starts 18 of 23 total revenue price x quantity 19 of 23 average revenue TR/QS 20 of 23 marginal revenue change in TR/ change in Q 21 of 23 sales maximisation means selling most possible volume without making a loss 22 of 23 The profit maximisation output occurs when MR=MC 23 of 23
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