IGCSE Econ Ch 20 Firms

The primary sector is ___________________

The secondary sector involves _______________

The tertiary sector involves _______________

Decide which of the following circumstances are likely to explain the existence of a number of small firms in an industry.

• A global market.

• Low barriers to entry and exit.

• The need for high expenditure on research and development.

• The existence of diseconomies of scale at a low level of output.

• High start-up costs.

Explain two influences on the size of a firm.

Answer explanation

Two influences on the size of a firm include economies of scale, where larger firms can reduce costs per unit, and market demand, which can dictate the necessary size to meet consumer needs effectively.

Identify two reasons to explain a merger of banks.

Answer explanation

Two reasons for a bank merger include increased market share, allowing banks to compete more effectively, and cost savings through economies of scale, which can enhance profitability.

Explain two advantages gained by bank customers from a bank merger.

Answer explanation

Bank mergers can lead to improved services and lower fees for customers due to increased efficiency and economies of scale. Additionally, customers may gain access to a wider range of products and services from the combined institutions.

Decide the type of internal economies each of the following may be an example of: a A farmer using a combine harvester.

Answer explanation

The farmer using a combine harvester exemplifies technical economies of scale. This is because the use of advanced machinery increases efficiency and productivity, reducing the average cost of production as output increases.

What is most likely to be supplied by small firms?

• Banking

• Film production

• Shoe repair

• Steel

A toy manufacturer merges with a chemical company. What type of merger is this?

• Conglomerate

• Horizontal

• Vertical merger backwards

• Vertical merger forwards