Intro to industrial economics

edwinesosa's version from 2015-05-25 12:46


Question Answer
4 main characteristics determining perfectly competitive to monopoly spectrumbarriers to entry, product homogenity, profit, number of firms in the industry
benefits of competitionmore choice, cheaper products, higher quality of products
Types of internal economies of scalePurchasing ( buying in bulk) + Financial (cheaper loans) + Technical ( can spread the cost of machinery over more units and this machinery should help them be more productive) + Marketing (can spread cost of marketing over more units and more products) + managerial (manager's salary spread over more units) + risk bearing economies ( wider product range and customer base)
Types of internal diseconomies of scaleCommunication and Co-ordination + Motivation (low morale as limited company input so workers less productively efficient and high turnover rates so recruitment costs) + Bureacracy
Types of external economies of scaleskilled labour attracted to area (silicon valley) + Suppliers locate nearby (lower transport costs) + shared infrastructure + share innovation
Types of external diseconomies of scaleRegulation costs + higher labour and raw material costs


Question Answer
Types of Barriers to entryBrand loyalty + Marketing + limit pricing + start up costs + patents and knowledge + EOS + Access to raw materials and distribution
Types of sunk costsAdvertising + R&D + specialist equipment &depreciation
Types of growth (buisness espansion)Hoz intergration (merge or take over firms at the same stage of production in the same industry) + Vertical forward intergration (merge or take over firms further on in their chain of production in the same industry) + Vertical backwards (merge with a firm at a privius stage in their chain of production in the same industry) + conglomerate intergaration (merges or takes over a firm in a completely different industry)
Reasons for Hoz intergrationEOS + less competition and more market share and power
Reasons for vertical forwards intergrationGaurantee buyer + profits and EOS + Limit competitors (eg specifying that rivals wouldn't be solld there)
Reaseons for vertical backwardsGuarantee supplier + Profits, EOS + Control cost and quality
Reasons for Conglomerate intergrationspread risk + EOS + Synergy + expansion if one area is becoming less profitable
Problems with Hozdiseconomies + Competition commision + merger may not work due to clash of cultures + over dependence on an industry + cost of takeover
Problems with verticaldisEOS + Competition commision + merger may not work due to clash of cultures + over dependence on an industry + cost of takeover + Lack of expertise
Problems with ConglomeratedisEOS + focus and core competentcies + risk losing band image if one business has a problem + cost of merger or takeover
Problems with competition commissionregulatory capture + time lags
extra Reasons to remain smallniche marketing (often luxury) and meeting customer needs + allows personal service eg hairdressers + lack of expertise funds motivation + too much competition and low barriers to entry in their market so profits will be competed away

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