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Micro 1 > Micro 1.3 > Flashcards

Micro 1.3 Flashcards

1
Q

What is a capital good?

A

A good that is used to make consumer goods and services. E.g. Machinery, hardware, software and factories.

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2
Q

What are consumer goods and services?

A

A good or service which satisfies a consumers needs and wants directly.

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3
Q

What are consumer durables?

A

A sub-division of consumer goods that provide a steady flow of satisfaction/utility over their working life. E.g. a washing machine or phone.

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4
Q

What are consumer non-durables?

A

A sub-division of consumer goods that are used up in the act of consumption. E.g. Drinking coffee or turning the heating on.

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5
Q

What are consumer services?

A

A haircut or a ticket to a show.

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6
Q

What is production?

A

The conversion of factor inputs into final output.

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7
Q

What is labour productivity?

A

The output per worker per unit of time.
Total output / no. of workers

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8
Q

What is Capital productivity?

A

The output per unit of capital.

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9
Q

What is factor productivity?

A

The average output of all the factors of production.

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10
Q

What is production?

A

The measure of the value of the output of the goods and services.

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11
Q

What is productivity?

A

A measure of efficiency of factors of production.

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12
Q

What factors effect Labour productivity?

A

Degree of competition, Advances in production technology, Quality of management, Specialisation within businesses, Level of investment, Level of demand.

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13
Q

Why is productivity important?

A

It ensures that a firm minimises costs.

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14
Q

When does productive efficiency occur?

A

When there are no additional output that can be produced from the factor inputs available at the lowest possible average or unit cost.

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15
Q

What is the minimum efficient scale (MES)?

A

The point where a business is productive efficient. Note: Different business’ have different MES.

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16
Q

What is specialisation?

A

When economic units such as individuals, firms, regions or countries focus on producing specific goods or services.

17
Q

What is the division of labour?

A

The specialised use of workers within an organisation. The production process is broken down into separate tasks to increase the output per person.

18
Q

What are short-run average costs (SRAC)?

A

The time period in which a minimum of one factor of production is fixed, looking at the marginal product of the variable factor of production and the productivity of the firm.

19
Q

What are long-run average costs (LRAC)?

A

The time period in which no factors of production are fixed and their scale of output can be changed.

20
Q

What are sunk costs?

A

The costs of a firm that have already been paid for and are not recoverable if the firm wishes to leave the industry. They are unavoidable.

21
Q

How do you calculate total cost (TC)?

A

Fixed cost (FC) + Variable cost (VC)

22
Q

What are fixed costs?

A

Costs that do not vary with the level of output in the short run. E.g. Rent

23
Q

What are variable costs?

A

Costs that change depending on the level of output relating directly to the production or sale of a product. E.g. Wages and raw materials.
Note: Total variable costs and variable costs are the same.

24
Q

How do you calculate Average total cost (ATC)?

A

Total cost (TC) / Output (Q)
Measured in cost per unit produced.

25
Q

What are marginal costs?

A

The change in the total cost from a business producing just one extra unit of a good or service.

26
Q

How do you calculate Average variable cost (AVC)?

A

Variable cost (VC) / Output (Q)

27
Q

How do you calculate Average fixed costs (AFC)?

A

Fixed costs (FC) / Output (Q)

28
Q

What is the economies of scale?

A

A proportionate saving in costs gained by an increased level of production.

29
Q

What is the internal economies of scale?

A

A measure of a company’s efficiency of production.

30
Q

What is the external economies of scale?

A

Business-enhancing factors that occur outside a company but within the same industry.

31
Q

What are the characteristics of a monopoly?

A

-Larger barriers, preventing other firms from entering the market.
-Single firm has over 25% of the market
-Limited number of products
-Firms able to set market prices
Examples: Google, Tesco, British gas

32
Q

What are the characteristics of an oligopolistic market?

A

-Few firms have over 50% of the market
-Products have differentiated
-Large obstacles preventing firms from entering the market (Barriers to entry)
-Lots of Advertising
-Lots of innovation and invention

33
Q

What are the characteristics of a monopolistically competitive market?

A

-Large number of firms with little market power
-slightly differentiated products
-low barriers to enter market
-price dictated by market
-uses advertising locally

34
Q

What are the characteristics of a perfectly competitive market?

A

-Large number of firms with little market power
-Homogenous products
-No obstacles to enter market
-Price dictated by market
-No advertising nessary

35
Q

How do you calculate profit?

A

revenue - cost

36
Q

What is economic efficiency?

A

Making the best use of scarce resources among competing ends so that economic and social welfare are maximised over time.

37
Q

When does economic efficiency occur?

A

When the value that consumers placed on a good or service equals the cost of resources used in production. So price = marginal cost

38
Q

When does allocative efficiency occur?

A

When a business in a given market or industry reaches the lowest point on the average cost curve.

39
Q

What is dynamic efficiency?

A

Focusing on the changes in the consumer available in the a market together with the quality of of goods and services that we buy.

Micro 1 (8 decks)

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