4.1 Production Flashcards
What is production?
Coverts inputs or factor services into outputs of goods and services
What does the production theory lead to?
-short-run production theory
-long-run production theory
What does the short-run production theory lead to?
The law of diminishing returns and then the short-run cost theory
What does the long-run production theory lead to?
Returns to scale-long-run reduction theory
What do both the short-run cost theory and the long-run cost theory lead to?
Revenue theory
What are the inputs in the production process?
Factors of production:
-land
-labour
-capital
-enterprise
What does capital comprise of?
Capital goods which the firm owns or hires together with intellectual capital it owns or hires
What do the entrepreneurs do in terms of production?
-what to produce
-how to produce
-whom to produce for
And how much of the other factors of production are employed
What makes up the cost of production?
-employing land
-labour and capital
-entrepreneurs own services
What is the productivity gap?
Difference between labour productivity
E.g in uk and other developed countries
What is the equation for productivity?
Total output/number of workers X100
What is productivity associated with?
Labour productivity
Output per worker
What is capital productivity?
Output per unit of capital
(Can also be land productivity and entrepreneurial productivity)
What industry is manufacturing extremely important?
The manufacturing industry
Who are the G7 countries?
-USA
-UK
-Japan
-France
-Germany
-Canada
-Italy
Which is th only country in the G7 that had worse labour productivity than the UK in 2015 and 2016?
Japan
What are the possible expirations for the UK’s poor labour productivity in comparison with other countries since 2009?
-inadequate investment into new capital goods
-low wages in UK economy
-employers keeping employees on during recessions
What has the fall in labour productivity done in the long and short run?
Short-run: helped employment in the UK
Long-run: unknown but not favourable
What is a firm?
-productive organisation which sells its output of a good and/or services commercially
Why don’t firms get continuously bigger according to Ronald Coase?
-Gaines from economies of scale are defeated by the cost of bureaucracy
-as the firm gets larger there may be decreasing returns to the Entrepreneurial function
According to Ronald Coase why do firms exist?
They reduce transaction costs
(Information costs,bargaining costs and cost of keeping trade secrets)
What is the aim of lean manufacturing?
Combine the best of both craftwork and mass production
-uses less of each input (labour,machinery, space and time)
Mass production focuses on reducing defects to a tolerable level
LEAN PRODUCTION SEEKS TO ELIMINATE ALL DEFECTS
