Read the summary and the most important questions on Economics of Strategy, 6th Edition International Student Version | 9781118319185 | David Besanko

• 1 Firm Boundaries

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• What does a total cost function tell us?

  It represents the relationship between a firm's total costs, denoted by TC and the total amount of output it produces in a given time period, denoted by Q.

• What does it mean when costs are senified?

  FIxed over certain ranges of output but variable overother ranges.

• When do you speak of constant returns (AC)?

  When average cost neither increases or decreases respictively to output there is constant return.

• Explain the relationship between AC and MC. Increase, decrease and minimum average cost.

  When AC is decreasing (AC > MC), lies above the MC curve.
  When AC is increasing, (AC < MC) the AC curve lies below the MC curve.
  When AC is at a minimum, AC = MC, so the two curves must intersect.

• 1.2 The Horizontal Boundaries of the Firm

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• What does the functionalism in economics stand for? Name 3. 

  1. The various elements of the economic system that perform to create an equilibrium for the whole system. 

  2. Sees society as a made up of inter-dependent sections that work together to fulfil the functions that are necessary for the survival of the economy as a system. 

  3. Sees people and firms as socialized into roles and behaviours which fulfil the needs of the economy.  

• What is a descriptive theory? 

  This explains what one observes. 

• What does SCP stand for? 

  Structure Conduct Performance 

• What is the difference in perspective between functionalic economists and structural economists? 

  Functionalists look at the consumer welfare effects, where behaviour is fully determined. Structuralists look at the effects on behaviour, where behaviour is undetermined. 

• Explain productive efficiency (X-efficiency)?

  When production of one good is achieved at the lowest resource cost possible and where the maximum of output of one good is produced. 

• Name 3 types of economies that have to do with horizontal boundaries? 

  1. Economies of scale

  2. Economies of scope

  3. Learning economies