Cost and Revenue

Question 1

What is the definition of a price maker?

Answer 1

A firm that dictates its prices according to the market

Question 2

What is a price taker?

Answer 2

A firm that has to adjust its prices according to the market

Question 3

How is total revenue calculated?

Answer 3

Units sold x Price

Question 4

How is average revenue calculated?

Answer 4

Total revenue/output

Question 5

How is marginal revenue calculated?

Answer 5

TRn1-TRn

Question 6

When is total revenue maximised?

Answer 6

When MR=0

Question 7

What are the four business objectives

Answer 7

Profit maximization, Revenue Maximization, Sales maximization and satisfising

Question 8

Formula for sales maximisation

Answer 8

AR=AC

Question 9

Formula for profit maximisation

Answer 9

MR=MC

Question 10

What satisficing?

Answer 10

Aims for an adequate result

Question 11

What is normal profit?

Answer 11

Normal profit is the minimum level of profit required to keep a firm in the industry( TR=TC)

Question 12

When is normal profit achieved?

Answer 12

TR=TC

Question 13

What is supernormal profit?

Answer 13

TR>TC

Question 14

What is the shutdown run in the short run?

Answer 14

TR<VC

Question 15

What is the shutdown in the long run?

Answer 15

TC>TR

Question 16

What are the two types of economies of scale?

Answer 16

Internal and external

Question 17

What is internal economies of scale?

Answer 17

An internal economy of scale measures a company’s efficiency of production

Question 18

What is external economies of scale?

Answer 18

External economies of scale are have an effect on the whole industry.

Question 19

What are diseconomies of scale?

Answer 19

Diseconomies of scale are the cost disadvantages a business incurs

Question 20

What causes diseconomies of scale?

Answer 20

Diseconomies of scale happen when a company grows so large that its costs per unit increase.

Question 21

What causes economies of scale?

Answer 21

Economies of scale occur when a company’s average costs decrease as it produces more.

Question 22

What are the different forms of economies of scale?

Answer 22

Technical: Efficiency from better technology or machinery.
Managerial: Specialized management leading to better organization.
Financial: Lower borrowing costs due to better creditworthiness.
Purchasing: Discounts from buying raw materials in bulk.
Marketing: Spread advertising costs over more units.

Question 23

What are the types of diseconomies of scale?

Answer 23

Managerial Issues: Difficulty in managing a larger workforce and complex operations.
Communication Problems: Information gets distorted as it moves through layers of management.
Motivational Issues: Employees may feel less connected in a larger company, reducing productivity.
Bureaucracy:

Question 24

When a firm is a price taker , and demand is perfectly elastic , what does price equal to?

Answer 24

MR and AR.

=>each unit is sold at the same market price.

Question 25

What are the different costs associated with a firm?

Answer 25

TC,AC,MC,LAVC,VC