Costs+Revenues -unit 3 Flashcards
What is the long run
All factors of production are variable
Define fixed costs
Costs that do not change with output.
Only ever the case in short run.
Define variable costs.
Costs that do Chang with output and can pixie in long and short run
Define total costs
Fixed costs + variable costs
How is average fixed costs calculated
Fixed costs / output
How is average variable costs calculated
Variable costs / output
What is marginal costs
The change in total cost when one additional unit of output is produced.
Define productive efficiency
Occurs at the lowest cost per unit of output
Lowest point of average cost curve
Define allocative efficiency
Costs of production and demands of consumers are taken into account to maximise welfare.
What is internal economies of scale
Falling long run average costs associated with an increase in output
What are external economies of scale
Internal economies of scale occur when an individual firm expands, whereas external economies of scale have an impact of the entire industry and therefore lower long run average costs (and the LRAC curve)
State 5 types of economies of scale
Financial Risk bearing Marketing Managerial Increased dimensions
Why do firms experience diseconomies of scale
When they grow too large and move beyond the minimum efficient scale.
Managerial difficulties
How is total revenue calculated
Price x quantity
How is average revenue calculated
Total revenue / quantity
