Firms
Cambridge IGCSE Economics (0455) · Unit 3: Microeconomic decision makers · 10 flashcards
Firms is topic 3.5 in the Cambridge IGCSE Economics (0455) syllabus , positioned in Unit 3 — Microeconomic decision makers , alongside Money and banking, Households and Workers. In one line: A firm is an organization that employs factors of production to produce goods or services that it hopes to sell at a profit. Its primary goal is usually profit maximization.
This topic is examined in Paper 1 (multiple-choice) and Paper 2 (structured questions, including data-response items).
The deck below contains 10 flashcards — 10 definitions — covering the precise wording mark schemes reward. Use the 10 definition cards to lock down command-word answers (define, state), then move on to the concept and application cards to handle explain, describe and compare questions.
'firm' in economics and state its primary goal
A firm is an organization that employs factors of production to produce goods or services that it hopes to sell at a profit. Its primary goal is usually profit maximization.
Define 'firm' in economics and state its primary goal.
A firm is an organization that employs factors of production to produce goods or services that it hopes to sell at a profit. Its primary goal is usually profit maximization.
Explain the difference between a 'sole trader' and a 'partnership'.
A sole trader is a business owned and controlled by one person who receives all the profits but is personally liable for all the debts. A partnership involves two or more people who agree to share in the profits or losses of a business.
What is a 'company' in the context of business organizations?
A company is a business organization that has its own legal identity separate from its owners (shareholders). It can own assets, borrow money, and enter into contracts in its own name.
Distinguish between 'limited liability' and 'unlimited liability'.
Limited liability means the owners (shareholders) are only liable for the debts of the business up to the amount they invested. Unlimited liability means the owners are personally responsible for all the business's debts, even if it requires selling personal assets.
What is a 'private limited company' and what are its key characteristics?
A private limited company's shares are not offered to the general public. Shares are held by a select group of people, often family or friends, and the transfer of shares is restricted.
Describe a 'public limited company' and how it differs from a private limited company.
A public limited company can offer its shares to the general public on the stock exchange. This allows them to raise significant capital, but they face greater regulatory scrutiny and shareholder accountability.
Explain what a 'multinational corporation' (MNC) is and give an example.
A multinational corporation is a company that operates in more than one country. They often have production facilities or offices in various locations around the world.
Define 'merger' and provide a potential benefit for the firms involved.
A merger is when two or more companies agree to join together to form a single, larger company. A benefit could be increased market share and reduced competition.
Differentiate between horizontal and vertical 'integration' of firms.
Horizontal integration occurs when firms in the same industry and at the same stage of production merge. Vertical integration involves firms at different stages of the production process in the same industry merging; can be forward (closer to consumer) or backward (closer to raw materials).
Explain conglomerate integration and its common motivation.
Conglomerate integration occurs when firms in unrelated industries merge. A common motivation is diversification of business risk across different sectors.
Key Questions: Firms
Define 'firm' in economics and state its primary goal.
A firm is an organization that employs factors of production to produce goods or services that it hopes to sell at a profit. Its primary goal is usually profit maximization.
Explain the difference between a 'sole trader' and a 'partnership'.
A sole trader is a business owned and controlled by one person who receives all the profits but is personally liable for all the debts. A partnership involves two or more people who agree to share in the profits or losses of a business.
What is a 'company' in the context of business organizations?
A company is a business organization that has its own legal identity separate from its owners (shareholders). It can own assets, borrow money, and enter into contracts in its own name.
Distinguish between 'limited liability' and 'unlimited liability'.
Limited liability means the owners (shareholders) are only liable for the debts of the business up to the amount they invested. Unlimited liability means the owners are personally responsible for all the business's debts, even if it requires selling personal assets.
What is a 'private limited company' and what are its key characteristics?
A private limited company's shares are not offered to the general public. Shares are held by a select group of people, often family or friends, and the transfer of shares is restricted.
More topics in Unit 3 — Microeconomic decision makers
Firms sits alongside these Economics decks in the same syllabus unit. Each uses the same spaced-repetition system, so progress in one informs the next.
Cambridge syllabus keywords to use in your answers
These are the official Cambridge 0455 terms tagged to this section. Mark schemes credit responses that use the exact term — weave them into your answers verbatim rather than paraphrasing.
Key terms covered in this Firms deck
Every term below is defined in the flashcards above. Use the list as a quick recall test before your exam — if you can't define one of these in your own words, flip back to that card.
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