cost production revenue and profit Flashcards
short run production
a production cycle where at least one factor is fixed
We assume that the quantity of plant and machinery is fixed and that production can be altered by changing variable inputs such as labour, raw materials and energy
fixed factor
input factors that wont change due to production
types of fixed factors
equipment, machinery, buildings
long run production
all factors of production can fluctuate, factors are variable
total product
how much is being produced
average product
measure output per worker or capital
marginal product
measure the change in output from increasing variable factors such as workers
law of diminishing returns (short run)
theory that predicts that after some optimal level of capacity is reached, adding an additional factor of production will actually result in smaller increases in output.
production costs in the short run
the total fixed and variable costs incurred in the production of a good or service
economies of scale
cost advantages reaped by companies when production becomes efficient
how can companies achieve economies of scale
increasing production and lowering costs
what is revenue
the total amount of money brought in by a business operations measured over a set period of time
price takers
small businesses who must accept prices in a market to influence their own. too small of a business to make a difference and raise prices etc
price makers
businesses big enough with enough money, machinery etc that can gamble to make their own prices
there are no perfect substitutes
