1.4 production, costs and revenue Flashcards

1
Q

automation

A

automatic control; the process by which machines control other machines

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2
Q

average cost

A

total production cost divided by total output (cost per unit of output)

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3
Q

average revenue

A

total revenue divided by total output

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4
Q

capital productivity

A

output per unit of capital

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5
Q

constant returns to scale

A

when output increases by an equal proportion the increase in inputs

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6
Q

decreasing returns to scale

A

when output increases by a smaller proportion than the increase in inputs

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7
Q

diseconomies of scale

A

when long run average costs rise as output rises

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8
Q

division of labour

A

different workers performing different tasks in a good’s/services’ production, specialising to an extent

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9
Q

economies of scope

A

when it’s cheaper to make a range of products

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10
Q

economy of scale

A

when long-run average costs fall as output rises

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11
Q

external economy of scale

A

firms saving resulting from growth of the industry a firm is part of

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12
Q

fixed cost

A

costs of production that do not vary with output, only in the short run

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13
Q

increasing returns to scale

A

when output increases by a larger proportion than the increase in inputs

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14
Q

internal economy of scale

A

firms saving resulting from growth of the firm itself

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15
Q

labour productivity

A

output per worker

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16
Q

law of diminshing returns

A

by continually adding variable factors atop fixed factors, eventually both average and marginal return to the fixed factor fal

17
Q

long run

A

time period in which none of the factors of production are fixed, and all can be varied

18
Q

long-run average cost

A

long run total cost per unit of output

19
Q

long-run production

A

when a firm changes the scale of all factors of production

20
Q

mechanisation

A

when a firm transfers from becoming more labour intensive to becoming more capital intensive

21
Q

minimum efficient scale (MES)

A

the lowest level of output at which average costs are minimised

dependent on the market structure as well as barriers to entry

22
Q

normal profit

A

total revenue equals total costs; the minimum profit required to keep a firm operating in an industry

23
Q

operating costs

A

same as variable costs

24
Q

overheads

A

same as fixed costs

25
Q

production

A

a set of processes that converts inputs into outputs

26
Q

productive efficiency

A

minimised average total cost

27
Q

productivity

A

output per unit

28
Q

profit

A

total revenue - total costs

29
Q

rate of return

A

income received from an investment

30
Q

returns to scale

A

the scale by which a firm’s output changes as the scale of all inputs are altered

31
Q

short run

A

time period in which at least one of the factors of production are fixed and cannot be varied

32
Q

specialisation

A

a worker only performing a specific task or a small range of tasks

33
Q

sunk cost

A

non-recoverable costs of entering a market

34
Q

supernormal (abnormal) profit

A

any level of profit over and above normal profit

35
Q

technical economy of scale

A

cost saving through changing the production process

36
Q

total cost

A

total fixed cost added to the total variable cost