4 - Production, Costs and Revenue Definitions Flashcards
Specialisation
An organisation focusing on the production on a few goods in order to be made efficient.
Division of Labour
The separation of a work process into a number of tasks, with each task performed by a separate person or group of people.
Trade
A concept involving the purchase and sale of goods and services, with compensation paid to a seller by a purchaser or the exchange of goods or services.
Exchange
A marketplace where securities, commodities, and other financial instruments are traded.
Production
The process by which different inputs, including capital, labour and land, are used to create outputs in the form of products or services.
Short - Run Production
The process of utilising one or more inputs to produce output over a period of time where at least one input is fixed.
Long - Run Production
All factors of production and costs are variable.
Productivity
How much output can be produced with a given set of inputs.
Labour Productivity
The measure of how much output is produced per unit of labour input.
Capital Productivity
The measure of how well physical capital is used in providing goods and services.
Productivity Gap
The difference between one country’s productivity levels, in comparison with the country’s main export competitors.
Short Run
Within a certain time period, at least one input is fixed, while others remain variable.
Long Run
All factors of production and costs are variable.
Marginal Returns
The rate of return for a marginal increase in investment.
Average Returns
The mathematical average of a series of returns generated over a specific period of time.
Total Return
The actual rate of return of an investment or a pool of investments over a period.
Law of Diminishing Returns
As investment in a particular area increases, the rate of profit from the investment after a certain point, can’t continue to increase if other variables remain constant.
Increasing Returns to Scale
Constant returns to scale, output increases by a larger proportion than the increase in inputs during the production process.
Constant Returns to Scale
Increasing the number of inputs leads to an equivalent increase in the output.
Decreasing Returns to Scale
The proportion of output is less than the desired increased input during the production process.
Total Cost
Fixed costs + variable costs.
Average Cost
Total Cost / Quantity.
Long Run Average Cost
The lowest cost at which a firm can produce a given level of output in the long run, when all inputs are variable.
Technical Economy of Scale
A firm produces goods or resources more efficiently.
