Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Micro Economics > 4.1.4 Production Costs and Revenue > Flashcards

4.1.4 Production Costs and Revenue Flashcards

1
Q

Production

A

The total output of goods and services produced by an individual, firm or country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Productivity

A

A measurement of the rate of production by one or more factors of production

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Labour productivity

A

Total output per period of time/ number of units of labour

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Ways to improve productivity

A
  • better education/training
  • better technology
  • specialisation and division of labour
  • increased motivation
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Specialisation

A

When a worker completes a specific task in a production process

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Pros of specialisation

A

+ higher output
+ higher quality
+ greater variety of goods and services produced
+ more opportunities for economies of scale
+ more competition so lower costs and prices

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Cons of specialisation

A
  • work is repetitive, workers become demotivated
  • could be kore structural unemployment as skills may not be transferable
  • variety could decrease for consumers
  • there could be higher worker turnover for firms
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Examples of countries which specialise in certain areas

A

Norway is one of the worlds largest oil exporters

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Comparative advantage

A

When a country can produce a goof at a lower opportunity cost than another country

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Absolute advantage

A

When a country can produce more of a good with the same factor inputs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Pros of specialisation in traded goods

A

+ greater world output so gain in economic welfare
+ lower average costs
+ increased supply of goods to choose from
+ outward shift in PPF curve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Cons of specialisation in traded goods

A
  • less developed countries might use up their non- renewable resources too quickly
  • countries become over dependant on the export of one commodity
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Functions of money

A
  • medium of exchange
  • measure of value
  • store of value
  • method of deferred payment
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Short run

A

Where at least one factor of production is fixed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Long run

A

All factors of production are variable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Different type of returns

A
  • marginal returns- extra output derived per each extra unit of labour
  • average returns- the output per unit of input
  • total returns- the total output produced
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

The law of diminishing returns

A

When the marginal return of labour falls. Therefore the extra unit of labour adds less than the unit before. This can only occur in the short run

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Types of returns to scale

A
  • increasing RtS- an increase in input leads to a more than proportional increase in output
  • constant RtS- an increase in input leads to a proportional change in output
  • decreasing RtS- an increase in input leads to a less than proportional change in output
19
Q

In the long run what is true of fixed costs?

A

They don’t exist all costs are variable

20
Q

Fixed costs

A

Costs that don’t vary with output

21
Q

Variable costs

A

Costs that change with output

22
Q

Total costs

A

Fixed costs + variable costs

23
Q

Average costs

A

Total costs/ quantity produced

24
Q

Marginal costs

A

The cost of producing one extra unit of output

25
Q

What shape is the short run average costs curve and why

A

U shaped due to diminishing returns since at least one of the factors of production is fixed, therefore marginal costs increase

26
Q

Shape of long run average cost curve

A

L shaped, initially costs fall since firms take advantage of economies of scale but after MES costs rise due to diseconomies of scale however these are offset by economies of scale

27
Q

Internal economies of scale

A

When a firm becomes larger average costs of production fall as output increases

28
Q

What are the 6 examples of economies of scale

A
  • Risk bearing- fiend can spread the cost of uncertainty
  • Financial- banks lend cheaper loans to bigger businesses
  • Managerial- they specialise labour
  • Technological- can invest in better technology
  • Marketing- costs of advertising is spread
  • Purchasing- larger firms can buy in bulk

(Really Fun Mums Try Making Pies)

29
Q

External economies of scale

A

These occur within the industry

30
Q

Diseconomies of scale

A

When output passes a certain point and average costs start to increase per extra unit of output produced

31
Q

What returns to scale do economies and diseconomies of scale have?

A

Economies of scale = increasing returns to scale

Diseconomies of scale = decreasing returns to scale

32
Q

Describe the relationship between the SRAC curve and LRAC curve

A

• the LRAC curve envelopes the smaller u shaped SRAC curves and it always equals to or below the SRAC curve

33
Q

What happens to the LRAC curve when there are external economies of scale

A

The curve shifts

34
Q

Total revenue

A

Price x quantity sold

35
Q

Average revenue

A

Total revenue/ quantity sold

Basically price

36
Q

Marginal revenue

A

The extra revenue earned from the sale of an extra unit

37
Q

When does AR=MR

A

In perfect competition when demand is perfectly elastic

38
Q

Profit

A

Total revenue- total costs

39
Q

Normal profit

A

When TR= TC

40
Q

Abnormal profit

A

When TR>TC

41
Q

Roles of profit in a market economy

A
  • reward for entrepreneurs
  • it incentives entrepreneurs to innovate and make better products
  • profits can be held and used for later investment
  • profits act as a signal to other other firms to join the market
42
Q

Invention

A

The process of creating a new product or new way to make a product

43
Q

Innovation

A

Improving or contributing to existing products

44
Q

How can technological change affect productivity, efficiency and costs of production

A
  • improves efficiency and productivity which lowers cost of production. This could also lead to better quality goods (mobile phones)
  • creative destruction can occur (Netflix destroying blockbusters)
  • productive firms stay in the market whilst others are forced out of it

Micro Economics (6 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions