Firms costs and revenues

Question 1

What is the equation for profit ?

Answer 1

Revenue - costs

Question 2

What is the equation for revenue ?

Answer 2

Value of sales - price of outputs sold

Question 3

What is the definition of short-run ?

Answer 3

The period of time in which some factors of production are fixed

Question 4

What is the definition of long run ?

Answer 4

A period of time in which all factors can be varied (time to change everything)

Question 5

What is the production function ?

Answer 5

a functional relationship between the output of goods or services produced and the inputs used in the production process

Question 6

What is the short run subject to ?

Answer 6

The law of diminishing marginal returns

Question 7

What is the law of diminishing marginal returns ?

Answer 7

For example, as you employ more labour there will become a point that the marginal product of labour begins to decrease

Question 8

When does task specialisation occur ?

Answer 8

This occurs as you employ more labour, the opportunity to specialise in tasks arises which increases the output of products even more

Question 9

How to work out the average product of labour ? (APL)

Answer 9

Total output produced divided bu

the number of workers employed

Question 10

What is the marginal product of labour ?

Answer 10

This is the change in total output produced as a result of employing one more worker

Question 11

Equation for the marginal product of labour ?

Answer 11

Change in total product of labour divided by the employing one more worker

Question 12

What are variable costs ?

Answer 12

These are costs which vary with quantity ofn output produced

Question 13

What are fixed costs ?

Answer 13

Costs which do not vary with the quantity of output produced

Question 14

What is the equation for a forms total costs ?

Answer 14

Total fixed costs plus total variable costs

Question 15

What is the equation for the average cost ?

Answer 15

Total cost divided by quantity

Question 16

Equation for average fixed costs ?

Answer 16

Total fixed costs divided by

quantity

Question 17

Equation for average variable costs ?

Answer 17

Total variable costs divided by quantity

Question 18

What is the scale of production ?

Answer 18

firms output equals inputs

Question 19

What happens when a firm increases it’s factor inputs?

Answer 19

1. increasing returns to scale (a percentage increase in inputs, larger increase in output )
2. Constant returns to scale (a percentage increase in inputs, measn the same increase in outputs
3. Decreasing returns to scale ( an increase in inputs results in a smaller increase in output)

Question 20

What is economies of scale ?

Answer 20

Occurs when the average cost per unit of output falls as the scale of production increases

Question 21

What is diseconomies of scale ?

Answer 21

Occurs when the average cost per unit of output increases as the scale of production increases

Question 22

What are the two main issues of managing a bigger business ?

Answer 22

1. Coordination and control - inefficiency and costs

2. Motivational - absenteeism, labour turnover and costs

Question 23

Why is letting staff go a bad idea ?

Answer 23

1. Bad impact on those let gp (morale)
2. Bad omage among customers
3. Brand reputation quality decreases due to higher costs

Question 24

What is a price taker ?

Answer 24

A firm that has to take the market price of its product sa given

Question 25

What is a price maker ?

Answer 25

A firm that can determine the price it charges for its goods

Question 26

What is total revenue ?

Answer 26

The total money a firm receives from the sale of output over a given period of time

Question 27

What is average revenue ?

Answer 27

The amount of revenue per unit sold

Question 28

What is marginal revenue ?

Answer 28

The money a firm receives from the sale of one more unit of its output over a time period

Question 29

The equation for total revenue ?

Answer 29

The price multiplied by quantity

Question 30

The equation for average revenue ?

Answer 30

Total revenue divided by quantity multiplied by price

Question 31

Equation for marginal revenue ?

Answer 31

Change in total revenue divided by one more (change in quantity )