4.1 Production

Question 1

What is production?

Answer 1

Coverts inputs or factor services into outputs of goods and services

Question 2

What does the production theory lead to?

Answer 2

-short-run production theory
-long-run production theory

Question 3

What does the short-run production theory lead to?

Answer 3

The law of diminishing returns and then the short-run cost theory

Question 4

What does the long-run production theory lead to?

Answer 4

Returns to scale-long-run reduction theory

Question 5

What do both the short-run cost theory and the long-run cost theory lead to?

Answer 5

Revenue theory

Question 6

What are the inputs in the production process?

Answer 6

Factors of production:

-land
-labour
-capital
-enterprise

Question 7

What does capital comprise of?

Answer 7

Capital goods which the firm owns or hires together with intellectual capital it owns or hires

Question 8

What do the entrepreneurs do in terms of production?

Answer 8

-what to produce
-how to produce
-whom to produce for

And how much of the other factors of production are employed

Question 9

What makes up the cost of production?

Answer 9

-employing land
-labour and capital
-entrepreneurs own services

Question 10

What is the productivity gap?

Answer 10

Difference between labour productivity

E.g in uk and other developed countries

Question 11

What is the equation for productivity?

Answer 11

Total output/number of workers X100

Question 12

What is productivity associated with?

Answer 12

Labour productivity

Output per worker

Question 13

What is capital productivity?

Answer 13

Output per unit of capital

(Can also be land productivity and entrepreneurial productivity)

Question 14

What industry is manufacturing extremely important?

Answer 14

The manufacturing industry

Question 15

Who are the G7 countries?

Answer 15

-USA
-UK
-Japan
-France
-Germany
-Canada
-Italy

Question 16

Which is th only country in the G7 that had worse labour productivity than the UK in 2015 and 2016?

Answer 16

Japan

Question 17

What are the possible expirations for the UK’s poor labour productivity in comparison with other countries since 2009?

Answer 17

-inadequate investment into new capital goods
-low wages in UK economy
-employers keeping employees on during recessions

Question 18

What has the fall in labour productivity done in the long and short run?

Answer 18

Short-run: helped employment in the UK
Long-run: unknown but not favourable

Question 19

What is a firm?

Answer 19

-productive organisation which sells its output of a good and/or services commercially

Question 20

Why don’t firms get continuously bigger according to Ronald Coase?

Answer 20

-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

Question 21

According to Ronald Coase why do firms exist?

Answer 21

They reduce transaction costs

(Information costs,bargaining costs and cost of keeping trade secrets)

Question 22

What is the aim of lean manufacturing?

Answer 22

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