Chapter 4 - Production costs and revenue Flashcards
What are the 4 production inputs
Capital, Land, Labour, Enterprise
What is the the production output
Products e.g goods and services
What is production
It’s the conversion of inputs into outputs
What is short-run production
Short-run production occurs when a firm adds variable factors of production (usually labour) to fixed factors of production.
What is long-run production
Long-run all factors are variable
How is productivity measured
Output per unit of input
How is labour productivity measured
Output per worker
How is capital productivity measured
Output per unit of capital
What is specialisation
A worker only performing one task or a narrow range of tasks
What is the division of labour
Where the production process is broken down into a number of stages, each worker being allocated a separate task
Advantages of specialisation/division of labour to the business
Specialist workers become quicker at producing goods
Production becomes cheaper per good because of this
Production levels are increased
Advantages of specialisation/division of labour to the worker
Each worker can concentrate on what they are good at and build up their expertise
Higher pay for specialised work
Improved skills at that job
Disadvantages of specialisation/division of labour to the business
Greater cost of training workers
Quality may suffer if workers become bored by the lack of variety in their jobs
Disadvantages of specialisation/division of labour to the worker
Boredom as they do the same job
Their quality and skills may suffer
May eventually be replaced by machinery
What is trade
The buying and selling of goods and services
What is exchange
to give something in return for something else received.
What is the Law of Diminishing Returns
a variable factor of production (e.g labour) is added to a fixed factor of production (e.g. capital) eventually the marginal return will fall.
How do you increase returns of scale
If % increase in output exceeds % increase in input
How do you keep returns of scale constant
If % increase in output equals % increase in input
How do you decrease returns of scale
If % increase in output is less than % increase in input
What are costs
Payments are firm must make from production of a good or service
What are variable costs (VC)
Costs that vary with output
What are fixed costs (FC)
Costs that don’t vary with output
