Production, Cost and Revenue Flashcards
Production
Converting inputs or factor services into outputs of goods and services
Short-run production
Occurs when a firm adds variable factors of production to fixed factors of production
Long-run Production
Occurs when a firm changes the scale of all the factors of demand
Productivity
Output per unit of input
Labour Productivity
Output per worker
Capital Productivity
Output per unit of capital
Productivity Gap
The difference between labour productivity in the UK and in other developed economies
Specialisation
A worker performing a certain task, or a small range of tasks. Also, different firms specialising in producing different goods and services
Division of labour
This concept goes hand in hand with specialisation. Different workers perform different tasks in the course of producing a good or service
Trade
The buying and selling of goods and services
Exchange
To give something in return for something else received. Money is a medium of exchange
Short-run
The time period in which at least one factor of production is fixed and cannot be varied
Long-run
The time period in which no factors of production are fixed and in which all factors of production can be varied
Fixed Cost
Cost of production that in the short run does not vary with production
Variable Cost
Cost of production which changes with the amount that is produced. Even in the short run.
Total Cost
The whole cost (fixed costs + variable costs)
Average cost
total costs of production/output
Long run average cost
long run total costs/output
Economies of Scale
As output increases, long-run average costs fall
Diseconomies of scale
As output increases, long-run average costs rise
Technical Economies of Scale
A cost saving generated through changes to the ‘productive process’ as the scale of production and the level of output increase
What are the 6 types of economies of scale?
Technical, Managerial, Marketing, Financial (Capital raising), Risk-bearing and Economies of scope
What are the 3 types of diseconomies of scale?
Managerial, Communication and Motivational
Internal Economies of scale
Cost saving resulting from the growth of the firm itself
External economies of scale
Cost saving resulting from the growth of the industry or market of which the firm is a part
Total revenue
All the money received by a firm from selling its total output
Average revenue
Total revenue/output; in a single product firm, average revenue equals the price of the product
Profit
The difference between total sales revenue and total cost of production
