Costs

Question 1

What’s rent

Answer 1

a sum of money payed on a regular basis or the use of something, typically payed to a landlord for a property.

Question 2

Wages are

Answer 2

a fixed payment earned by your service to a job payed on a daily or weekly basis.

Question 3

What’s interest

Answer 3

an extra amount on top of what you owe

Question 4

Profit

Answer 4

the money gained through a business once its broke even

Question 5

Value added is?

Answer 5

value added is therefore the difference between the market price paid for a product by a consumer and the cost of the natural And man made materials, components and resources to make it

Question 6

What’s Productivity ?

Answer 6

this is how much output can be produced per unit of input in a certain amount of time. It is a measure of efficiency

Question 7

What’s specialisation

Answer 7

this is when a firm specialises in a certain thing they are good at eg banks focus on financial issues.

Question 8

Division of labour is where?

Answer 8

each worker specialises in a certain area which helps speed up the production process.

Question 9

Short run

Answer 9

at least one of your factors of production is fixed and cannot be expanded

Question 10

Long run is?

Answer 10

all the factors of production can be varied

Question 11

Fixed costs

Answer 11

costs that do not change due to the level of output. Such as rent and salaries

Question 12

Variable costs are ?

Answer 12

costs that vary depending on the level of output. Like raw materials

Question 13

What are total costs?

Answer 13

the cost of variable costs and fixed costs

Question 14

Average fixed costs are?

Answer 14

fixed costs divided by output

Question 15

What are average variable costs?

Answer 15

variable costs divided by level of output

Question 16

What are average total costs?

Answer 16

total costs divided by the output

Question 17

Optimum output

Answer 17

where the firm is most efficient is the minimum point on the average total cost curve. You should note that this is not where the firm maximises profit.

Question 18

Total revenue?

Answer 18

the total amount of sales before wages and production costs and all. To calculate the Total Revenue (TR) you simply multiply the number sold by price.

Question 19

Average revenue

Answer 19

this will be the same as the price.revenue divided by output.

Question 20

Break even point

Answer 20

where the total costs is equal to total revenue. Where no money is lost or gained. When profits are at 0.

Question 21

Economies of scale

Answer 21

Economies of scale are the cost savings a business makes as it gets bigger eg
Using specialist staff
Borrowing money cheaper
Getting discounts from suppliers because of bulk orders
Having own transport to move products around

Question 22

What are diseconomies of scale?

Answer 22

Diseconomies of scale are when costs rise because of the size of the business eg
Communications are bad because the business is so big
Difficult to get people together to make decisions

Question 23

What is marginal costs

Answer 23

The cost of producing one extra unit of goods or service