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    3b Microeconomic Decision Makers - The Firm

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    The document discusses market structures and the behavior of firms within different market structures. It addresses topics such as monopolies, competition, costs of production, and the relationship between firms and consumers. Specifically, it notes that while monopolies may benefit from economies of scale in lowering production costs, they may also face diseconomies of scale and regulatory costs that increase production costs. Overall, the document suggests that monopolies do not necessarily always have low costs of production.

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    3b Microeconomic Decision Makers - The Firm

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    abdulla.rasheed
    10 views6 pages
    The document discusses market structures and the behavior of firms within different market structures. It addresses topics such as monopolies, competition, costs of production, and the relationship between firms and consumers. Specifically, it notes that while monopolies may benefit from economies of scale in lowering production costs, they may also face diseconomies of scale and regulatory costs that increase production costs. Overall, the document suggests that monopolies do not necessarily always have low costs of production.

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    The document discusses market structures and the behavior of firms within different market structures. It addresses topics such as monopolies, competition, costs of production, and the relationship between firms and consumers. Specifically, it notes that while monopolies may benefit from economies of scale in lowering production costs, they may also face diseconomies of scale and regulatory costs that increase production costs. Overall, the document suggests that monopolies do not necessarily always have low costs of production.

    Copyright:

    © All Rights Reserved
    Download as DOC, PDF, TXT or read online from Scribd
    Download as doc, pdf, or txt
    10 views6 pages

    3b Microeconomic Decision Makers - The Firm

    Uploaded by

    abdulla.rasheed
    The document discusses market structures and the behavior of firms within different market structures. It addresses topics such as monopolies, competition, costs of production, and the relationship between firms and consumers. Specifically, it notes that while monopolies may benefit from economies of scale in lowering production costs, they may also face diseconomies of scale and regulatory costs that increase production costs. Overall, the document suggests that monopolies do not necessarily always have low costs of production.

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    © All Rights Reserved
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    of 6

    3b.

    Microeconomic Decision Makers - the firm


    3.5 Firms
    1. Define a state-owned enterprise. (2) TB

    2. Explain, with examples, the difference between the secondary sector and the tertiary sector.[4]

    3. Discuss whether or not the growth of the primary sector is beneficial to a country. [8]

    4. Discuss whether or not having a large primary sector is a disadvantage to an economy. [8]

    5. Explain two differences between private sector investment and public sector investment. [4]

    6. Discuss whether cars should be produced by the private sector or the public sector. [8]

    7. Discuss whether or not the public sector should be responsible for the supply of all internet
    services. [8]

    8. Discuss whether consumers would benefit more from healthcare being provided by the private
    sector or the public sector. [8]

    9. Discuss whether or not private sector firms are likely to charge lower prices than public sector
    firms. [8]

    10. Explain two types of mergers. [4]

    11. Distinguish between a horizontal merger and a vertical merger and give an example of each. (4) TB

    Section 4: The Firm as a Producer & Employer Page | 1


    12. Explain two advantages to a firm of a horizontal merger. [4]

    13. Explain two reasons why commercial banks may want to merge. [4]

    14. Discuss whether or not a merger can help a firm survive. [8]

    15.

    16. Explain two reasons why a merger may result in higher prices for consumers. [4]

    17. Analyse the possible effects on consumers of a merger between two paper-producing firms.[6]

    18. Discuss whether or not a merger between two book publishing firms will benefit consumers. (8) TB

    19. Discuss whether or not mergers benefit an economy. [8]

    20. Discuss whether or not a government should stop firms merging. [8]

    21. Discuss whether or not a government should encourage firms to merge. [8]

    22. Explain two challenges facing small firms. [4]

    23. Explain why a firm may decide to stay small. (4) TB

    24. Analyse the reasons for the existence of small firms. [6]

    25. Discuss whether or not it is an advantage to keep a firm small. [8]

    26. Discuss whether or not small firms are more likely to go out of business than large firms. [8]

    27. Explain one type of economy of scale that Cainiao is able to enjoy. (2) TB

    28. Analyse two internal economies of scale. (6) TB

    Section 4: The Firm as a Producer & Employer Page | 2


    3.6 Firms and production
    1. Define investment. (2) TB
    2. Explain the difference between labour-intensive and capital-intensive industries. [4]

    3. Analyse three causes of an increase in demand for capital goods. (6) TB

    4. Explain two advantages of capital-intensive production. [4]


    5. Explain why the production of cars may increase whilst the productivity of car workers may fall. (4) TB
    6. Discuss whether or not adopting capital-intensive production will benefit consumers. [6]

    7. Discuss whether or not industries becoming more capital-intensive will increase unemployment. (8) TB

    8. Analyse why a firm may become more capital-intensive. [6]


    9. Analyse the reasons why car production has become more capital-intensive. (6) TB

    10. Explain two advantages of labour-intensive production. (4) TB


    11. Analyse how labour-intensive production can benefit an economy. [6]

    12. Explain two ways a firm could increase the productivity of its workers. [4]

    3.7 Firms’ costs, revenue and objectives


    1. Giving an example, define variable cost. (2) TB

    2. Identify an example of a fixed cost. (1) TB

    Section 4: The Firm as a Producer & Employer Page | 3


    3. Define average fixed cost. (2) TB

    4. Explain two reasons why a loss-making firm may continue to produce. [4]

    5. Analyse how average cost can change as output increases. [6]

    6. Discuss whether or not a firm will benefit from an increase in its output. [8]

    7. Discuss whether or not a firm should have growth as its main objective. [8]

    8.

    9. Analyse, using a diagram, the effect of an increase in output on average fixed cost (AFC) and
    total fixed cost (TFC). [6]

    10. Analyse, using diagrams, how a rise in output affects total fixed cost and average fixed cost. (6)TB

    11. Explain two causes of an increase in a firm’s profit. (4) TB

    12. Discuss whether or not the profits of Ecuador’s textile firms are likely to have increased
    between 2016 and 2019. [6]

    13. Discuss whether or not firms try to maximise profits. (8) TB

    14. Discuss whether or not the growth of an industry will increase the profit earned by the firms in the industry.
    (8) TB

    3.8 Market structure

    1. Define a barrier to entry. (2) TB

    2. Explain two characteristics of a competitive market. (4) TB

    3. Explain two reasons why a large US commercial bank may charge a high price for its services. [4]

    Section 4: The Firm as a Producer & Employer Page | 4


    4. Analyse how firms following the objective of profit maximisation may benefit consumers. (5) TB

    5. Analyse the advantages that consumers may gain from a competitive market. [6]

    6. Discuss whether or not an increase in competition is likely to benefit Vietnamese consumers.


    [6]

    7. Discuss whether or not consumers benefit from a competitive market. [8]

    8.

    9. Analyse how a change in the number of firms in a market can affect the profits that are earned. (6) TB
    10. Discuss whether or not competition is beneficial for airlines. [6]

    11. Discuss whether or not competition is harmful to a firm. [8]

    12.

    13. Discuss whether or not competition between firms in the same industry is always a
    disadvantage to workers. [8]

    14.

    15. Discuss whether or not a monopoly benefits consumers. (8) TB

    16. Discuss whether or not a government should allow monopolies. [8]

    17. Discuss whether all monopolies have low costs of production. [8]

    18. Discuss whether or not consumers would benefit from a firm becoming a monopoly. [8]

    19. Discuss whether or not small e-commerce delivery firms can compete against large e-commerce delivery
    firms. (6) TB
    20.

    Section 4: The Firm as a Producer & Employer Page | 5


    Discuss whether all monopolies have low costs of production. [8] (Use relevant diagram)

    Monopolies are firms that dominate the market for a particular


    product. They supply 100% of the market and usually there
    are no substitutes to the product it supplies. There is no
    competition for a monopoly.
    A monopoly may not have a low cost of production as it may
    allocate resources inefficiently. Monopolies do have any
    competition as they may simply produce low quality products
    and earn large profits without working hard to lower costs of
    production.

    A monopoly will usually require a large scale of production to


    operate and may soon grow too large and face diseconomies
    of scale. It may have supply constraints pushing up the cost
    of production. It may be subject to labour diseconomies as
    the workers feel alienated in such a large enterprise leading
    to extra cost of labour disputes. All this could promote
    increased costs of production. Furthermore, governments
    may implement regulations that the monopoly must rigidly
    follow increasing the cost of production at each step.
    However, monopolies may be able to maintain a low cost of
    production as it grows. It can benefit from economies of
    scale. The advertising cost will be spread over a large base,
    lowering costs. Banks will provide loans easily due to
    available collateral and suppliers will also reduce costs as
    they can deliver bulk orders lowering their transport costs.
    These internal economies of scale help monopolies keep low
    costs of production.

    Monopolies may invent new production methods,


    technologies and invest in R & D to keep their costs low to
    compete with international firms. They may also try to be
    efficient if there are high fines or high taxes in the economy.

    21.

    Section 4: The Firm as a Producer & Employer Page | 6

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