48 terms in 3
Monopolistic competition
Monopolistic competition combines elements of perfect competition and monopoly: many firms selling slightly differentiat
Theme 3: Business Behaviour and the Labour Market
Monopoly
Monopoly is a market structure with one firm (the monopolist) supplying the entire market for a product with no close su
Theme 3: Business Behaviour and the Labour Market
Monopsony
Monopsony is a market structure where a single buyer (or very few buyers) purchases a large proportion of industry outpu
Theme 3: Business Behaviour and the Labour Market
Perfect competition
Perfect competition is a market structure characterised by: many firms, identical products, perfect information, no barr
Theme 3: Business Behaviour and the Labour Market
Principal-agent problem
The principal-agent problem occurs when those managing a business (agents/managers) have different objectives from those
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Business growth refers to the expansion of a firm's operations, typically measured by increases in revenue, sales, asset
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Organic growth is the expansion of a business through internal development, including increasing sales of existing produ
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Vertical integration occurs when a firm expands by integrating with other firms at different stages of the supply chain.
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Horizontal integration is the merger or acquisition of firms operating at the same stage of the production process and t
Theme 3: Business Behaviour and the Labour Market
3.1.2: Business growth
Conglomerate integration (or diversification) occurs when a firm expands into industries completely unrelated to its cur
Theme 3: Business Behaviour and the Labour Market
3.1.3: Mergers and acquisitions
A merger occurs when two firms of roughly equal size combine to form a new entity, whilst an acquisition involves one fi
Theme 3: Business Behaviour and the Labour Market
3.1.3: Mergers and acquisitions
A demerger occurs when a firm separates into two or more independent companies by dividing assets and operations. This r
Theme 3: Business Behaviour and the Labour Market
3.2.1: Profit maximisation
Profit maximisation is the traditional economic assumption that firms set output where marginal revenue equals marginal
Theme 3: Business Behaviour and the Labour Market
3.2.1: Profit maximisation
Revenue maximisation occurs where marginal revenue equals zero (MR = 0), corresponding to the highest point on the total
Theme 3: Business Behaviour and the Labour Market
3.2.1: Profit maximisation
Satisficing is a behavioural objective where firms target achieving acceptable or satisfactory profit levels rather than
Theme 3: Business Behaviour and the Labour Market
3.2.1: Profit maximisation
Sales maximisation is equivalent to revenue maximisation, where the firm pursues maximum sales quantity and revenue (MR
Theme 3: Business Behaviour and the Labour Market
3.3.1: Total revenue
Total revenue (TR) is the firm's total income from sales, calculated as Price × Quantity (P × Q). It represents the tota
Theme 3: Business Behaviour and the Labour Market
3.3.1: Total revenue
Average revenue (AR) is calculated as Total Revenue ÷ Quantity (TR ÷ Q), representing the revenue per unit sold. It equa
Theme 3: Business Behaviour and the Labour Market
3.3.1: Total revenue
Marginal revenue (MR) is the additional revenue received from selling one additional unit of output, calculated as Chang
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Total cost (TC) is the sum of all costs incurred in producing a given level of output. It comprises Total Fixed Cost (TF
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Total fixed cost (TFC) represents all costs that remain constant regardless of output level in the short run. These incl
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Total variable cost (TVC) represents all costs that increase as output increases. These include raw materials, energy, p
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Average cost (AC), also called average total cost (ATC), equals Total Cost ÷ Quantity (TC ÷ Q). It represents the cost p
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Average fixed cost (AFC) equals Total Fixed Cost ÷ Quantity (TFC ÷ Q). It represents the fixed cost allocated to each un
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Average variable cost (AVC) equals Total Variable Cost ÷ Quantity (TVC ÷ Q). It represents the variable cost per unit an
Theme 3: Business Behaviour and the Labour Market
3.3.2: Total cost
Marginal cost (MC) is the cost of producing one additional unit, calculated as Change in Total Cost ÷ Change in Quantity
Theme 3: Business Behaviour and the Labour Market
3.3.3: Economies of scale
Economies of scale exist when a firm's long-run average cost (LRAC) decreases as output increases. These are cost advant
Theme 3: Business Behaviour and the Labour Market
3.3.3: Economies of scale
Diseconomies of scale occur when a firm's long-run average cost (LRAC) increases as output increases beyond minimum effi
Theme 3: Business Behaviour and the Labour Market
3.3.3: Economies of scale
External economies of scale are cost reductions available to firms in an industry regardless of individual firm size, ar
Theme 3: Business Behaviour and the Labour Market
3.3.3: Economies of scale
Minimum efficient scale (MES) is the output level at which long-run average cost is minimised. It represents the smalles
Theme 3: Business Behaviour and the Labour Market
3.3.4: Normal profit
Normal profit is the profit level where Total Revenue equals Total Cost, resulting in zero economic profit. It represent
Theme 3: Business Behaviour and the Labour Market
3.3.4: Normal profit
Supernormal profit (also called economic profit or abnormal profit) occurs when Total Revenue exceeds Total Cost by more
Theme 3: Business Behaviour and the Labour Market
3.3.4: Normal profit
A loss occurs when Total Revenue is less than Total Cost (TR < TC), resulting in negative profit or economic loss. Price
Theme 3: Business Behaviour and the Labour Market
3.4.1: Productive efficiency
Productive efficiency occurs when a firm produces at the minimum point of its average total cost curve, producing the ma
Theme 3: Business Behaviour and the Labour Market
3.4.1: Productive efficiency
Dynamic efficiency refers to a firm's incentive and ability to innovate, invest in research and development, and improve
Theme 3: Business Behaviour and the Labour Market
3.4.1: Productive efficiency
X-inefficiency (or X-ineffectiveness) occurs when a firm operates above its minimum average cost curve, incurring higher
Theme 3: Business Behaviour and the Labour Market
3.4.4: Oligopoly
Oligopoly is a market structure characterised by: few dominant firms (typically 2-10) controlling large market shares, h
Theme 3: Business Behaviour and the Labour Market
3.4.4: Oligopoly
A concentration ratio (CR) measures market concentration by summing the market shares of the largest firms. The most com
Theme 3: Business Behaviour and the Labour Market
3.4.4: Oligopoly
In game theory, the Lanchester equation describes how symmetric competitors in price wars or marketing spending reach eq
Theme 3: Business Behaviour and the Labour Market
3.5.3: Wage determination
Wage determination refers to how wages are set in labour markets. In competitive labour markets, wages equal the margina
Theme 3: Business Behaviour and the Labour Market
3.5.3: Wage determination
Wage discrimination occurs when workers of equal ability and productivity are paid different wages based on personal cha
Theme 3: Business Behaviour and the Labour Market
3.6.1: Competition policy
Competition policy comprises government measures to maintain and promote competitive markets, including merger control,
Theme 3: Business Behaviour and the Labour Market
3.6.1: Competition policy
Privatisation is the sale of state-owned enterprises to private investors and operation by private companies rather than
Theme 3: Business Behaviour and the Labour Market