3.1.4-Production, costs, revenue and profit Flashcards
What are average costs (AC)?
The cost of producing one thing. Total cost divided by quantity.
Formula: TC / Q
What are average fixed costs (AFC)?
The fixed costs of producing one thing. Fixed costs divided by quantity.
Formula: FC / Q
What is average revenue (AR)
The amount of revenue gained from producing one thing .Total revenue divided by quantity
Formula: TR / Q
What are average variable costs (AVC)
The variable costs of producing one thing. Variable costs divided by quantity.
Formula: VC / Q
What is the break even point?
Where total revenue = total cost (no profit or loss made)
What are business objectives?
Specific and measurable targets set in order to meet the aims of the business
What is cash?
Notes, coins and debit cards
What are costs?
The costs (fixed, variable, direct, indirect) experienced with running a business
What are fixed costs?
Costs that have to be paid regardless of level production
What is marginal cost (MC)?
The additional cost of producing an extra unit
What is marginal revenue (MR)?
The additional revenue of producing an extra unit
What is profit?
Revenue-costs (the money left over after all costs are deducted
Formula: TR - TC
What is revenue?
The amount of income recieved by the business over a given time period
Formula: P x Q
What are total costs?
Fixed costs + Total variable costs
Formula: FC + TVC
What are variable costs?
Costs that are dependent on the level of production
What are assembly plants?
Factories
What is bureaucracy?
Paperwork that clogs up the operations of departments
What is de-industrialisation?
The decline in the secondary industry (manufacturing) the UK went through in the 1980’s
What is production?
The transformation of inputs into goods and services
What is productivity?
A measure of output per unit of input
What are diseconomies of scale?
When an increase in the scale of production results in increased average costs (e.g. over-time pay)
What are economies of scale?
When increases in production lead to reduced total average costs (e.g. discount for bulk buying)
What are external economies of scale?
Benefits a firm receives from a growth in the industry
What are financial economies of scale?
Gaining access to better rates and financial specialists
What are internal economies of scale?
Benefits a firm receives from a growth in size
What are managerial economies of scale?
A firm can attract the best staff into the company
What are marketing economies of scale?
Large marketing expenses can be spread over a larger amount of products/services
What are purchasing economies of scale?
Bulk buying brings down external costs
What are risk-bearing economies of scale?
The ability of firms to spread its risks over a large number of areas
What are technical economies of scale?
Firms can afford better, more advanced machinery to produce goods
What are the 4 main business objectives?
- Maximising profit
- Sales growth
- Increasing market share
- Social enterprises
What are some ethical and moral considerations of producers?
- Ensuring sufficient business taxes are paid to central governments
- Equality of pay for staff
- Environmental impact
- Exploitation of workers living in relative poverty
What are methods to increase productivity?
- Use of technology and machinery
- Training of workers
- Improving morale at the workplace
- More effective management
What are the benefits of increased productivity?
- Output should increase leading to higher sales
- Costs are lowered leading to higher possible profit levels
- Lowering costs could be passed on to a reduction in price-resulting in the business becoming more competitive
- It could improve the quality of the products-improved competitiveness
- Higher productivity could lead to higher wages for workers
What are the different types of economies of scale?
- Technical economies
- Purchasing economies
- Marketing economies
- Financial economies
- Managerial economies
- Risk-bearing economies
What are the different types of diseconomies of scale?
- Communication problems
- Co-ordination and control problems
- Morale
