Practise explaining firm growth and survival through scale, internal expansion, mergers and integration while evaluating cartels, takeover outcomes and ownership-control problems.
What is likely to make it more difficult for a small firm to survive?
increased preference on the part of consumers for distinctive non-standardised products
reductions in the rate of interest charged by commercial banks
the absence of effective barriers to the entry of potential competitors
the existence of decreasing returns to scale
C
Why might a firm adopt a policy of diversification?
to achieve cost economies of scale
to agree common prices with rivals
to ensure greater ability to spread investment risks
to increase productivity of labour
C
A major UK chemical firm was bought by its rival, a Dutch chemical firm.
What definitely occurred when the Dutch firm bought the UK firm?
a partnership
economies of scale
horizontal integration
increased profits
C
Which change would make it easier for a cartel to operate effectively?
an increase in competition from closely related industries
an increase in the number of firms in the industry
an increase in the range of products made by cartel members
an increase in the stability of the market for its products
D
What is most likely to increase the principal-agent problem?
ensuring the actions of agents are known by the managers
linking the rewards of managers with the profitability of the firm
removing from managers the opportunity to hold shares
preparing contracts that compel agents to work in the interest of the principal
C