Chp 16 Flashcards
Fixed cost definition
Fixed cost is cost that doesn’t change with output ex rent
Fixed cost definition
Fixed cost is cost that doesn’t change with output ex rent
Variable cost definition
Variable cost is cost that will change with output ex water bill
Total cost definition
All thr variable and fixed cost of making the total output
Average costs definition
The cost of making one unit of output
Total cost formula
Fixed cost + variable cost
Total cost formula
Fixed cost + variable cost
Average costs formula
Total costs/output
Where Costs data is used
It is used to decide if a business shoukd stop making a product or not ex setting price
Economics of scale meaning
Means that there is a reduction in average costs due to an increase of sales of operations
Explain financial economies
Loads of banks find it easier to large firms because they find them less risky so it’s easier for large firms to borrow money at lower interest rate
Managerial economies
Larger firms are more able to hire specialist managers to help improve the quality of decision and make fewer mistakes
Marketing economies
Larger firms can spread its marketing and advertising budget over a large output
Purchasing economies
Larger firms can buy more raw materials in bulk at a higher trade discount since the suppliers offer discounts on large businesses
Purchasing economies are also known as
Bulk buying economies
Technical economies
Many big firms use flow of production to make their output this often uses the latest tech which is expensive and only big firms can afford it
Flow production
A manufacturing process that is defined by the continues the flow of goods
Flow production
A manufacturing process that is defined by the continues the flow of goods
What does diseconomies of scale mean
There’s a factor that cause average costs to risenas the scale of operations increases(av cost rise)
What is poor communication
The managers might not be able to communicate directly wirh employees if a firm becomes to big
This leads to more mistakes and bad decision making
What is poor communication
The managers might not be able to communicate directly wirh employees if a firm becomes to big
This leads to more mistakes and bad decision making
Lack of commitment from the employees
In a very big firm managers might not have day to day contact with the employees and they might not feel valued and demotivated
Can cause high labour turnover and poor good quality
Lack of commitment from the employees
In a very big firm managers might not have day to day contact with the employees and they might not feel valued and demotivated
Can cause high labour turnover and poor good quality
Weak coordination
The firms av costs may rise as a result of managers in different departments
