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THE-THEORY-OF-THE-FIRM-Q

The document discusses the theory of the firm, covering topics such as the distinction between firms and industries, production decisions, costs of production, and factors influencing firm size and location. It also addresses economies of scale, the existence of small firms, and environmental implications of production activities. Additionally, it includes questions and tasks related to the concepts presented.

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maxamadkong
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18 views

THE-THEORY-OF-THE-FIRM-Q

The document discusses the theory of the firm, covering topics such as the distinction between firms and industries, production decisions, costs of production, and factors influencing firm size and location. It also addresses economies of scale, the existence of small firms, and environmental implications of production activities. Additionally, it includes questions and tasks related to the concepts presented.

Uploaded by

maxamadkong
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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17 - THE THEORY OF THE FIRM

The topic entails ;


- Meaning and distinction between firm and industry;.
- Discuss factors that influence the decision on what to produce.
- Discuss the various costs of production and their derivation.
- Differentiate between small and large firms
- Discuss the various factors influencing location of firms; reasons for local-
ization and delocalization.
- Explain meaning of economies and diseconomies of scale and how they in-
fluence production decisions of the firm.
- Explain the reasons for continued existence of small firms despite
economies enjoyed by large scale firms.
- Discuss environmental implications on production activities.

1. Highlight four ways a trader benefits from localization of industries

2. State four factors that determine the size of a firm

3. Highlight four measures the government may take to promote delocalization


in the country
4. Highlight four reasons why small scale businesses are popular in Kenya in-
spite of economies
of scale associated with large scale organizations

5. State five reasons for the existence of small firms in an economy

6. Give four ways in which a firm may achieve marketing economies of scale

7. The table below represents units of output and their cost of production. Find
the values of
costs A, B, C and D
Units of Total Total Total cost Average Average Average Margina
output fixed cost variable fixed cost variable cost(AC) cost (MA
(TFC) cost (AFC) cost
(TVC) (AVC)
3 300 240 A 100 80 180 60
4 300 320 620 75 B 155 80
5 300 500 800 C 100 160 180
6 300 720 1020 50 120 D 220
8. The table below shows the total cost of a certain product at given output
levels
Output (units) 0 10 20 30 40 50 70 80
Total cost (Kshs) 300 380 470 550 620 680 730 770
At output of 50 units; determine
a) Total fixed costs

b) Average variable cost

c) Average total cost

d) Marginal cost

9. Give four reasons why a firm may choose to remain small despite the benefits
of
expansion

17. -THE THEORY OF THE FIRM


1. Highlight five reasons why a firm may be located near the market for its prod-
ucts
2. Explain five reasons why the government may adopt the delocalization policy
of locating
3. Discuss five factors that may account for the existence of small firms in an
economy
4. Explain five factors that determine the size of a firm

5. Explain five factors that determine the decision of a firm on what good sand
services
to produce

6. Explain five circumstances under which a firm may be located near the source
of raw
Materials
7. Outline any five reasons that account for the popularity of small scale retails
in Kenya
8. Explain five factors that may account for the survival of small firms in an in-
dustry.

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