cost rev and production flashcards
total, marginal and average revenue calc
total rev= price X qty sold
average revenue = total revenue/ qty = price, quantity
demanded at each price level- revenue per unit
MR= change in TR / change in qty
- extra revenue/ TR generated from producing extra unit of output
invention vs innovation
what is specilisation
individual worker, firm, region, country producing limited range of goods/ services
through sepcilialisation and devision of labour worker productivity increases increasing efficiency decreasign AC
what is production
converts inputs such as services of FOP into final outpit to satisfy consumer needs and wants
output per worker per period of time
more productive- same input higher output
this can be achived through training and advancing caputal machinery
medium of excgange
specialisation can only occur when there is a medium of exchange for produing g/s that specialise in e.g. money in return for service, important for UK limited production, therefore need to use medium of echange to gather g/s from other countrys who sepcialise.
- avoids need for bartering where requires double coincidence of wants
what are returns to scale
relationsip between an increasein a firms impitd and proportional chnag in ouput ( occurs in the long term )
AVC, AFC. ATC
average fixed costs fall as output increases able to spread cost oover larger voume of output, incentive for firms to increase output
average variable costs intially fall in short term but begin to rise at higher levels of output, diminishing returns - bottlenecks, overcrouding
average total costs, total cost to produce at given output both AFC+ VC combined
marginal cost
addition to a firms totoal cost for making an additional unit of output
- MC initally falls as increase output but then increases - diminishing returns
relationship between AR and MR
when MR is greater than AR, AR increases
MR less than AR, AR falls
AR=MR, neother rising or falling
nature of MR/ AR deoendson competition in the marekt- market structure
AR= total rev/ qty- revenue per unit sold, qty demanded at each price- demand curve
MR- chnage in TR/ change in QTY
addition to a firms TR from selling additional unit of output
TR= price X qty
perfect comp- AR=MR=D perfectly price elastic, each unit sold at same price- due to high comp no sense to chnage price
monopoly, MR less than AR, declines faster - downwards sloping, to sell more units must decrease price
price decrease affects all previous units sold
MR=0
TRmax
