production Flashcards
what are the 3 things shown on a production curve
total product
average product
marginal product
what is the total product
total volume or amount of final output produced by a firm using given inputs
what is the average product
output per unit of input
what is the marginal product
the additional output generated by additional input (workers)
what is the formula for the marginal product
change in total product/ change in inputs
what is the formula for the average product
total product/ units of labour
what are the three stages of the production curve
increasing marginal return
decreasing marginal return
negative marginal returns
what happens during stage 1 (draw out diagram to help its that sheet we did at the end of last year trust yourself go find it DONT BE LAZY)
TP, AP and MP all increase due to specialization
marginal returns increase
what happens during stage 2
due to fixed resources, the MP starts to decrease and TP will increase at a slower rate
what happens at stage 3
MP turns negative
TP decreases
when MP=AP the average stops increasing and starts to decrease
what does it mean when the MP is above 0
each additional unit of input 1 person is adding something to the total product causing it to rise.
what does it mean when MP=0
TP has risen as much as it can before its downfall
what does stage of return mean
amount of resources you are going to use to get an output
short run definition
a period in which at least 1 resource is fixed- it is not a scale of time
what are the types of per unit costs (4)
Average fixed cost
Average variable cost
Average total costs
Marginal costs
what are the types of total costs- this is 1 (3)
fixed costs
variable costs
total costs
what is a fixed cost
costs for a fixed resource that don’t change with the amount produced e.g rent
formula for the average fixed cost
fixed cost/ quantity
what is a variable cost
costs for resources that do change with the amount produced e.g raw materials
formula for average variable costs
variable costs/ quantity
total costs meaning
sum of fixed and variable costs
average total costs formula
total costs/ quantity
what is marginal return
the additional output gained from installing an additional unit of a factor of production
what is the difference between specialization and a division in labor
Specialization refers to a worker or firm focusing on a narrow range of tasks or goods/services where as a
division of labor occurs when different workers perform different tasks in the production process.
what is Long Run Average Total Cost Curve (LRATC)
average cost per unit of output over the long run where all inputs are variable
Long run average cost curve shows the lowest total cost to produce a given level of output in the long run
what is the minimum efficient scale
smallest level of output in the LR that a firm can produce while taking advantage of internal economies of scale. Resulting in the lowest possible long run average cost (LRAC)
where is the MES on a LRAC graph
where increasing economies of scale turns into constant returns to scale
what is internal economies of scale
advantages result from efficiencies within the firm itself, leading to a decrease in the average cost of production per unit as output increases. As firms grow larger, they can exploit internal economies of scale by improving operational efficiency, reducing costs, and enhancing productivity.
what is internal diseconomies of scale
irm’s cost per unit increases as its production scales up. These inefficiencies arise from problems within the firm as it grows too large, causing the firm to lose the advantages of increasing scale that it previously enjoyed. Internal diseconomies of scale are the opposite of internal economies of scale, where costs per unit decrease with growth.
