macroeconomics chapter 3

Question 1

short run production

Answer 1

At least one factor of production is fixed but the firm adds variable factors of production
firms are only able to influence price through changes to the production process.

Question 2

long run production

Answer 2

where all factors of production are variable

in the long run firms are able to adjust all costs

Question 3

productivity

Answer 3

output per unit of input (efficiency)

Question 4

labour productivity

Answer 4

output per worker

Question 5

capital productivity

Answer 5

output per unit of capital

Question 6

productivity gap

Answer 6

the difference in labour productivity I uk and other countries

Question 7

specialisation

Answer 7

a worker only performing one or a narrow range of tasks

can also mean firms specialising in producing different goods

Question 8

division of labour

Answer 8

different workers perform different tasks in the course of producing a good or service.

Question 9

trade

Answer 9

the buying and selling of goods and services

Question 10

exchange

Answer 10

to give something in exchange for something else

Question 11

short run

Answer 11

the time period in which at least factor of production is fixed and cannot be varied

Question 12

long run

Answer 12

all factors can be made variable

Question 13

fixed costs

Answer 13

cost that does not change with output

Question 14

variable cost

Answer 14

cost changes with output

Question 15

average costs

Answer 15

total cost divided by output

Question 16

economies of scale

Answer 16

as output increases long run average cost falls

Question 17

diseconomies of scale

Answer 17

as output increases long run average costs rises

Question 18

types of internal economies of scale (changes within a firm)

Answer 18

technical
purchasing
managerial
financial
risk bearing

Question 19

technical economies of scale

Answer 19

production lines- can be used to make a lot at low costs
large firms may be able to buy specialised equipment which reduces average cost
workers can specialise which may not be possible in small firms

Question 20

purchasing economies of scale

Answer 20

buying in bulk

Question 21

financial economies of scale

Answer 21

borrow money at lower interest rate if your a larger company

Question 22

risk bearing economies of scale

Answer 22

large firms less exposed to risk as they can risks can be spread by diversifying output

Question 23

managerial economies of scale

Answer 23

will be able to employ specialised managers leading to better decisions being made.

Question 24

examples of diseconomies of scale

Answer 24

managerial ( may have to make people lower in the business managers leading to bad decisions)
communication failure
motivational