5963759
Description
Flashcards by Teddy-Ann Quam, updated more than 1 year ago
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Created by Teddy-Ann Quam
over 8 years ago
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| Question | Answer |
| What are Economies of Scale? | Economies of scale refer to the benefits a firm obtains as it grows in size or increases its level of output |
| What are internal Economies of Scale? | Internal EOS are benefits that occur within a firm as it produces a larger amount of output |
| What are External EOS | External EOS are benefits that occur outside of a firm and are independent of the size of an individual firm These benefits are obtained by all the firms in that particular industry due to the growth of the entire industry |
| What are the five types of internal Economies of Scale? | Technical Economies (bigger firms can initiate the method of specialization, make better use of capital and do research and development to improve quality of products), Marketing Economies (bigger firms buy raw materials in bulk and may receive discounts and the cost of making one unit of output would be cheaper than a small firm), Financial Economies (it is easier and cheaper to obtain loans), Risk-bearing Economies (large firms are better able to sell a wide range of products and export goods overseas) and Managerial Economies (larger firms obtain better managers) |
| What are the five types of External Economies of Scale? | Supply of Skilled labour (local citizens would obtain training in that industry), Infrastructure (growth of an industry will result in better transport and communication in an area), Subsidiary industries (as an industry grows, other industries would be established to supply the industry), research and development (all firms benefit from innovation in their industry), Specialised services (as the industry grows, other firms will be established to provide services such as transportation and wholesaling, training facilities for the industry will also be established) |
| what are diseconomies of scale? | Diseconomies of scale refer to disadvantages that occur to a firm if it increases it output too much or beyond the optimum amount |
| What are internal diseconomies of scale? | Internal Diseconomies of scale are when a firm's increases in output raises its average cost in the long run |
| What are External diseconomies of scale | External diseconomies of scale are when the average costs of all firms in the long run rise |
| What are the three types of internal Diseconomies of scale | Managerial problems (as firms grow larger it is harder for managers to organise and supervise workers), breakdown in internal communication (relaying of information becomes difficult within larger firms) and reduction of the morale and motivation of employees (workers may feel alienated and out of touch with managers) |
| What are external Diseconomies of scale | Increasing traffic congestion (this can increase distribution costs), shortages of land for industrial sites (land and factories may become scarce causing increases in fixed cost) and development of labour shortages (a high accumulation of an industry in an area can cause a shortage of skilled workers) |
| What is an economic system? | An economic system is a plan designed by countries to solve the economic problem of allocating their scarce/limited resources (answering the economic questions) |
| What is a free economic system? | A free economic system is one in which individuals and firms are able to set up their own businesses and make their own economic decisions. |
| What are three characteristics of the Free/ Capitalist Economic system | There is a lot of competition, individuals and firms answer the basic economic system and there is little or no government intervention |
| Give one advantage and one disadvantage of a Free economic system | Advantages: Freedom of Choice, quality of goods Disadvantages: Inequalities of wealth, Pollution |
| What are three characteristics of a Planned/Command/Communist Economy | The government answers the economic questions, prices and wages are set by the government and government is not profit-oriented |
| What is one advantage and one disadvantage of a Planned Economic System | Advantages: Equal distribution of wealth, No unemployment Disadvantages: Lack of Choice and no incentives for work |
| What are two characteristics of a mixed economy? | There are two main sectors: private sector and public sector. Both private and public sector make decisions |
| What is one disadvantage and one advantage of a mixed Economic system? | Government provides welfare needs of the citizen. High taxes |
| What is a Nationalisation? | Nationalisation is the process of converting privately owned organisations into government organisations. Industries owned by the government are referred to as Nationalised Industried |
| What is Denationalisation? | Denationalisation refers to the government transfer of ownership of an industry or organisation to private individuals/firms. This processed is also called privatisation |
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