Brainscape's Knowledge GenomeTM

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


See full index

Economics > Business economics > Flashcards

Business economics Flashcards

1
Q

Total profit calculation

A

Total revenue - Total costs

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

What is the main objective of a firm?

A

To make profit

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

How does a firm achieve more profit?

A

Increasing revenue or decreasing costs

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

How to increase revenue?

A
  • Increase productivity
  • Specialisation
  • Division of labour
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What are the pros of specialisation?

A
  • Increased efficiency
  • Increase expertise, no time wasted
  • Less time training multiple skills
  • Can solve the problem of scarcity, resources being used more efficiently, more output produced per unit of input
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

What are the cons of specialisation?

A

Workers may become bored

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

Total revenue calculation

A

Price x quantity sold

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Total cost calculation

A

Fixed costs + variable costs

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

What are fixed costs + examples?

A

Costs that remain constant regardless of the level of output.. e.g Rent, loan repayments, fixed salary costs and marketing

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

What are variable costs + examples?

A

Costs that change with output e.g Packaging, energy and fuel costs, raw materials, commission bonuses

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

What is the equation for average variable costs?

A

Total variable costs/output

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

What does the fixed costs curve look like?

A

Flat

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What does the variable costs curve look like?

A

45 degrees

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What is the short run?

A

Amount of time by which at least 1 factor of production is fixed

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

What is the long run?

A

Amount of time whereby all factors can be varied

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

What are the 4 factors of production?

A

Land, labour, capital and enterprise

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Equations for:

  • Average cost
  • Average variable cost
  • Average fixed cost
  • Marginal cost
  • average total cost
A

Average cost = Total cost/output
Average variable cost = Total variable cost/output
Average fixed cost = Total fixed cost/output
Marginal cost = Change in total cost/change in output
Average total cost = average variable cost + average fixed cost

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

What is the marginal cost?

A

The cost to produce one more unit

19
Q

What does the graph of AC and MC look like (draw it)?

A
  • Costs on Y axis
  • Output on X axis
  • MC initially decreases then increases
  • AC decreases then decreases, hitting the MC curve at the lowest AC
20
Q

What are the benefits of specialisation?

A
  • It can help with the problem of scarcity, if more resources are used efficiently, more output can be produced per unit of input
  • Training costs are limited as workers are only trained to perform simple tasks
  • Better quality and higher quantity of products for the same amount of effort overall - i.e. increased labour productivity
21
Q

What are the disadvantages of specialisation?

A
  • Workers can do repetitive tasks which can lead to boredom
  • Countries can become less self sufficient and Over reliant. For example if a country specialises in manufacturing and imports all of its fuel, it could be in trouble if it falls out with its fuel supplier
  • Lack of flexibility and can lead to structural unemployment, for example if companies move elsewhere then the workforce left behind could find it difficult to adapt
22
Q

What are the 4 functions of money?

A
  • Medium of exchange
  • A measure of value
  • A store of value
  • A standard (or method) of deferred payment
23
Q

Why does the marginal cost curve initially decrease and then begin to increase in the short run?

A

The law of diminishing returns, so the MC curve is always U shaped

24
Q

What is the law of diminishing marginal returns?

A

As the level of a variable factor input is increased, marginal product (or marginal returns) will eventually begin to diminish

25
Q

What is the division of labour?

A

The division of labour refers to the breakdown of the production process into many separate tasks

26
Q

What is specialisation?

A

Specialisation refers to concentrating the production process on a particular good or task.

27
Q

What is production?

A

Production involves converting FOP Inputs (e.g. Raw materials and labour) into outputs (goods to sell).

28
Q

What is productivity?

A

Productivity is a measure of how efficient a firm is at producing it’s output and is defined as the output per unit of Input employed.

29
Q

What is labour productivity?

A

Labour productivity is the output per worker or output per hour worked

30
Q

How to improve labour productivity?

A

Better training
More experience
Improved technology
specialisation

31
Q

What are economies of scale?

A

The cost advantages gained by a firm from increasing output.

32
Q

What are the two categories of economies of scale?

A

Internal and external

33
Q

What are Internal economies of scale + 5 examples?

A

Internal economies of scale involve changes within a firm

  • Technical
  • Purchasing
  • Managerial
  • Financial
  • Risk-Bearing
34
Q

What is technical economies of scale?

A

The purchasing of specialist capital to use in production, helping reduce average costs

35
Q

What is purchasing economies of scale?

A

Larger firms making large quantity of goods require large quantities of raw materials (a FOP input), and so can often negotiate discounts with suppliers as larger firms are the most important customers of suppliers.

36
Q

What are managerial economies of scale?

A

Large firms can employ specialist managers to take care of different areas of the business e.g. Finance and customer service. This is a form of division of labour, meaning specialist managers gain expertise and experience in a specific area, usually leading to better decision making abilities.

37
Q

What are financial economies of scale?

A

Larger firms can borrow money at a lower rate of interest - Lending to them is seen as less risky

38
Q

What is risk bearing economies of scale?

A

Larger firms can diversify into different product areas and markets lading to firms being able to take risks - If a product fails, a larger firms other activity allow it to absorb the cost of failure as it has many other revenue streams.

39
Q

What are external economies of scale + examples?

A

External economies of scale involves changes outside a firm I.e. changes in Industries.

Examples include local colleges offering qualifications needed by big local employers + improvements in road networks.

40
Q

What are diseconomies of scale?

A

Diseconomies of scale are the cost disadvantages that firms incur due to an increase in output and can be divided into 2 categories, Internal and external.

41
Q

What are Internal diseconomies of scale?

A

Occurs due to changes within a firm

Wastage and loss can increase, bigger warehouses may lead to things getting lost of mislaid.

Communication may become more difficult as a firm grows (overcrowding)

42
Q

What are external diseconomies of scale + examples?

A

Occurs due to changes within Industries

As an Industry becomes larger, the price of raw materials may increase as demand is greater.

43
Q

Draw the LRAC and SRAC curves and the FC and VC curves.

A

Can’t add an image :sad_face:

Economics (11 decks)

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