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Commerce is solely focused on the trading of goods and does not include services.
False
Wholesale trade involves buying goods in small quantities from producers.
False
Retail trade sells goods directly to final consumers.
True
International trade can only occur between two countries.
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Import trade refers to the selling of goods to other countries.
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Entrepot trade involves importing goods for further processing before exporting them.
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Aids to trade include activities such as banking, insurance, and advertising.
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Bilateral trade is trade carried out between more than two countries.
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The presence of buyers and sellers is an essential feature of a market.
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Availability of a medium of exchange is not necessary for a market to function.
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Monopoly markets have features that completely eliminate competition.
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The availability of commodities is irrelevant to the existence of a market.
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Localization of industries refers to the desire of firms to cluster in specific areas.
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Amalgamation is the process of separating firms to increase competition.
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Perfect competition markets can be easily achieved in any economic environment.
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A firm should be defined as a collection of different industries.
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Specialization by skill includes dividing activities and allocating tasks based on workers' abilities.
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Regional specialization refers to a country focusing on various unrelated commodities.
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One of the advantages of specialization is that it encourages investment and innovation.
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An absence of a single specialist worker can halt the entire production process.
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Specialization primarily decreases dependence among countries.
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One disadvantage of specialization is that it can lead to worker boredom due to repetitive tasks.
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Specialization always results in an increase in the quality of goods produced.
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International specialization means a country produces commodities it can make more efficiently than others.
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A patent right ensures that the inventor's work can be duplicated by others.
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Royalties are payments made to the original creator for each unit of a product sold.
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Internal economies of scale can reduce production costs, leading to a potential monopoly.
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The size of a market is best served by multiple firms competing with each other.
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Firms entering a market with high additional costs are at an advantage compared to existing firms.
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In monopolistic competition, there are no barriers to entry or exit for firms.
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Restrictive practices can include selling products at a low price to eliminate competition.
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Perfect knowledge of the market is a characteristic of monopolistic competition.
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A holding company must own at least 51% of the shares in a subsidiary company.
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Cartels are typically formed by monopolistic firms.
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Horizontal merging occurs when firms at different production stages combine.
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A conglomerate merger involves firms that produce completely unrelated products.
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Franchising allows firms to produce goods using their own brand without any restrictions.
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A lateral merger involves companies that produce related products which compete with each other.
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Amalgamation helps in reducing the cost of advertising for the involved firms.
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Consortiums are permanent mergers between two or more firms.
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Study Notes
Definition of Commerce
- Commerce involves organizing the exchange and distribution of goods and services to meet human needs effectively.
- It encompasses trade and aids to trade.
Branches of Commerce
- Two primary branches:
- Trade
- Aids to trade
Trade
- Trade pertains to the buying and selling of goods.
- Divided into home trade and international trade.
Home Trade (Local Trade)
- Conducted within a country's borders.
- Subdivided into:
- Wholesale Trade: Purchase of goods in bulk from producers to sell to retailers.
- Retail Trade: Buying goods in smaller quantities from wholesalers to sell to consumers.
International Trade (Foreign Trade)
- Involves trade between countries and can be bilateral or multilateral.
- Types include:
- Import Trade: Buying goods from other countries.
- Export Trade: Selling goods to other countries.
- Entrepot Trade: Importing goods to re-export them, possibly after processing.
Aids to Trade
- Services that facilitate trade, such as:
- Transport
- Insurance
- Banking
- Warehousing
- Communication
- Advertising
- Market Research
Specialization
- Improves efficiency in production through various forms:
- By Process: Focusing on specific stages of production, e.g., weaving in textiles.
- By Profession: Concentrating on a specific field of expertise, e.g., teaching.
- By Region: Geographic focus on specific commodities, e.g., oil in South Sudan.
- Internationally: Countries specialize in what they produce best, enhancing comparative advantages.
Advantages of Specialization
- Increases production and improves product quality.
- Promotes innovation and saves time during production.
- Enhances workers' skills, boosting productivity.
- Creates trade based on surplus and facilitates the use of specialized tools.
- Raises living standards through better availability of goods.
- Fosters interdependence among nations, contributing to global peace.
- Maximizes resource utilization.
Disadvantages of Specialization
- Can lead to monotony and boredom from repetitive tasks.
- Risk of overproduction leading to waste.
- Potential depletion of natural resources.
- Absence of a specialized worker may halt the production process.
- Machines breaking down can disrupt entire operations.
- Reduced job variety may lead to dependency on a single trade.
- Can create unemployment due to increased mechanization.
- Nations may become overly reliant on others for goods.
- Large concentrations of people may lead to social issues.
Intellectual Property Rights
- Patent Right: Protects an inventor's work from duplication.
- Copyright: Grants exclusive rights to creators of intellectual property.
- Royalties: Payments made to creators based on sales of their works.
Market Structures
- Monopolistic Competition: A blend of perfect competition and monopoly, characterized by many buyers and sellers, product variations, and no entry barriers.
- Essential market elements include: buyers and sellers, commodities for exchange, and a medium of exchange.
Factors Affecting Demand and Supply
- Recognize essential factors that influence market demand and supply dynamics.
Functions of a Market
- Highlight the roles markets play within an economy.
Localization and Delocalization of Industries
- Understand location factors, including advantages and disadvantages of industry localization.
Merging and Integration of Firms
- Horizontal Merging: Firms at the same production stage combine for large-scale production.
- Vertical Merging: Firms at different production stages join to enhance efficiency.
- Conglomerate Merger: Unrelated firms merge to diversify risks.
- Lateral Merger: Related but non-competing firms join forces.
- Franchising: Sharing brand and production methods to expand market reach.
- Consortium: Joint task completion by multiple firms with a temporary partnership.
Merits of Amalgamation
- Reduces competition and increases production capacity.
- Minimizes duplication of products and eases access to financing.
- Lowers advertising costs by pooling resources.
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Description
This quiz covers the definition of commerce, its primary branches, and the distinctions between home and international trade. Understand the basics of trade, including wholesale and retail sectors, as well as aids to trade that facilitate commerce.
