Brainscape's Knowledge GenomeTM

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


See full index

Microeconomics > Chapter 4 > Flashcards

Chapter 4 Flashcards

1
Q

What is production

A

Converts inputs or factor services into outputs of goods and services

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

What are factors of production

A

Inputs into the production process, such as land, labour, capital and enterprise

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

What is the productivity gap

A

The difference between labour productivity e.g in the uk and in other developed economies

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

What is productivity

A

Output per unit of input

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

What is labour productivity

A

Output per worker

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

What is capital productivity

A

Output per unit of capital

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

What is a firm

A

A productive organisation which sells its output of goods and of services commercially

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

What is specialisation

A

A worker only performing one task or a narrow range of tasks. Also different firms specialising in producing different goods or services

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

What is the division of labour

A

This concept goes hand in hand with specialisation. Different workers perform different tasks in the course of producing a good or services

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

What is trade

A

The buying and selling of goods and or services

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

What is exchange

A

To give something in return for something else received. Money is a medium of exchange

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

What is the marginal returns of labour

A

The change in quantity of total output resulting from the employment of one more worker holding all the other factors of production fixed

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

What is the law of diminishing marginal returns

A

A short term law that states that as a variable factor of production is added to a fixed factor of production, both the marginal and eventually the average returns to the variable factor will begin to fall

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

What is total returns

A

The whole output produced by all the factors of production including labour employed by a firm

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

What is average returns of labour

A

Total output divided by the total numbers of workers employed

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

What is returns to scale

A

The rate by which output changes if the scale of factors of production is changed

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

What is a plant

A

An establishment such as a factory, a workshop or retail outlet, owned by and operated by a firm

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

What is increasing returns to scale

A

When the scale of all the factors of production employed increases, output increases at a faster rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

What is a fixed cost

A

Cost of production which in the short run does not change with output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

What is a variable cost

A

Cost of production which changes with the amount that is produced even in the short run

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

What is total cost

A

All the cost incurred when producing a particular size of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

What is average variable cost

A

Total variable cost divided by the size of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

What is marginal cost

A

Addition to total cost resulting from producing one additional unit of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

What is average fixed cost

A

Total cost of employing the fixed factors of production to produce a particular level of output divided by the size of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is average total cost

A

Total cost of producing a particular level of output divided by the size of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is economies of scale

A

As output increases long run average cost falls

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is diseconomies of scale

A

As output increases long run average cost rises

28
Q

What are internal economies and diseconomies of scale

A

Changes in long run average costs of production resulting from changes in the size of scale of a firm or plant

29
Q

What is an external economy of scale

A

A fall in long run average costs of production resulting from the growth of the market or industry of which the firm is a part

30
Q

What is an external diseconomies of scale

A

An increase in long run average costs of production resulting from the growth of the market or industry of which the firm is a part

31
Q

What is total revenue

A

All the money received by a firm for selling its output

32
Q

What is average revenue

A

Total revenue divided by output

33
Q

What is marginal revenue

A

Addition to total revenue resulting from the sale of one more unit of the product

34
Q

What is perfect competition

A

A market that displays six conditions of :
A large number of buyers and sellers
Perfect market information
Ability to buy or sell as much as desired at the ruling market price
The inability of a buyer or seller to influence the market price
A uniform or homogenous product
No barriers to entry or exit in the long run

35
Q

What is a price taker

A

A firm which is so small that it has to accept the ruling market price. If the firm raises it price it loses all its sales if it cuts its price it gains no advantage

36
Q

What is a price maker

A

When a firm faces a downward sloping demand curve for its product it possesses the market power to set the price at which it sells the product

37
Q

What is a quantity setter

A

When a firm faces a downward sloping demand curve for its product it possesses the market power to set the quantity of the good it wishes to sell

38
Q

What is profit

A

The difference between total sales revenue and total costs of production

39
Q

What is profit maximisation

A

Occurs at the level of output at which total profit is greatest

40
Q

What is normal profit

A

The minimum profit a firm must make to stay in business which is however insufficient to attract new firms into the market

41
Q

What is abnormal profit

A

Profit over and above normal profit

42
Q

What is technological change

A

A term used to describe the overall effect of invention, innovation and the diffusion or spread of technology in the economy

43
Q

What is invention

A

Making something entirely new something that did not exists before at all

44
Q

What is innovation

A

Improves on or makes a significant contribution to something that has already been invented thereby turning the results of invention into a product

45
Q

What is productive efficiency

A

For the economy as a whole occurs when it is impossible to produce more of one good without producing less of another
For a firm it occurs when the average total cost of production is minimised

46
Q

What is dynamic efficiency

A

Measures improvements in productive efficiency that occur in the long run over time

47
Q

What is monopolistic competition

A

A market structure in which firms have many competitors but each one sells a slightly different product

48
Q

What is creative destruction

A

Capitalism evolving and renewing itself over time through new technologies and innovations replacing older technologies and innovations

49
Q

Name the several types of internal economies of scale

A 
Technical economies of scale
Managerial economies of scale
Marketing economies of scale 
Financial or capital raising economies of scale
Risk bearing economies of scale
Economies of scope
50
Q

Name the several types of diseconomies of scale

A

Managerial diseconomies of scale
Communication failure
Motivational diseconomies of scale

51
Q

Technical economies of scale are caused by

A 
Indivisibilities  
The spreading of research and development costs 
Volume economies 
Economies of massed resources 
Economies of vertically linked processes
52
Q

What is indivisibilities?

A

Many types of plant or machinery are indivisible in the sense that there is a certain minimum size below which they cannot efficiently operate

53
Q

What’s the spreading research and development costs ?

A

Large plants research and development costs can be spread over a much longer production run reducing unit costs in the long run

54
Q

What are volume economies

A

Costs increase less rapidly than capacity

Industries such as transport, storage and warehousing

55
Q

What are economies of massed resources?

A

Operation of a number of identical machines in a large plant means that proportionately fewer spare parts need to be kept than when the fewer machines are involved

56
Q

What are economies of vertically linked processes

A

Linking of processes in a single plant can lead to saving in time, transport costs and energy

57
Q

What are managerial economies of scale?

A

Large the scale the firm the greater its ability to benefit from the specialisation and division of labour within management

58
Q

What is marketing economies of scale?

A

Bulk buying and bulk marketing

can use market power to buy supplies at lower prices

59
Q

What are financial and capital raising economies of scale?

A

bulk borrowing of financial funds to finance business expansion
larger firms can borrow at lower interest rates

60
Q

What are risk bearing economies of scale?

A

large firms are usually less exposed to risk than small firms because risks can be grouped and spread

61
Q

What are economies of scope?

A

factors that make it cheaper to produce a range of products together than to produce each on of them on its own

62
Q

What are some internal diseconomies of scale?

A

Managerial diseconomies of scale
communication failure
motivational diseconomies of scale

63
Q

What is managerial diseconomies of scale?

A

as a firm grows in size administration of the firm becomes more difficult
delegation of managerial functions to people lower in the organisation who lack appropriate experience

64
Q

what is communication failure?

A

in a larger organisation there may be too many layers of management between the top managers ordinary production workers

65
Q

What is motivational diseconomies of scale?

A

With large firms it is often difficult to satisfy and motivate workers

66
Q

What is the role of profit in market economy?

A
  • the creation of worker incentives
  • the creation of shareholder incentives
  • profits and resource allocation
  • profit as a reward for innovation and risk taking
  • profit as a source of business finance

Microeconomics (8 decks)

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