Production, Cost and Revenue

Question 1

Production

Answer 1

Converting inputs or factor services into outputs of goods and services

Question 2

Short-run production

Answer 2

Occurs when a firm adds variable factors of production to fixed factors of production

Question 3

Long-run Production

Answer 3

Occurs when a firm changes the scale of all the factors of demand

Question 4

Productivity

Answer 4

Output per unit of input

Question 5

Labour Productivity

Answer 5

Output per worker

Question 6

Capital Productivity

Answer 6

Output per unit of capital

Question 7

Productivity Gap

Answer 7

The difference between labour productivity in the UK and in other developed economies

Question 8

Specialisation

Answer 8

A worker performing a certain task, or a small range of tasks. Also, different firms specialising in producing different goods and services

Question 9

Division of labour

Answer 9

This concept goes hand in hand with specialisation. Different workers perform different tasks in the course of producing a good or service

Question 10

Trade

Answer 10

The buying and selling of goods and services

Question 11

Exchange

Answer 11

To give something in return for something else received. Money is a medium of exchange

Question 12

Short-run

Answer 12

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

Question 13

Long-run

Answer 13

The time period in which no factors of production are fixed and in which all factors of production can be varied

Question 14

Fixed Cost

Answer 14

Cost of production that in the short run does not vary with production

Question 15

Variable Cost

Answer 15

Cost of production which changes with the amount that is produced. Even in the short run.

Question 16

Total Cost

Answer 16

The whole cost (fixed costs + variable costs)

Question 17

Average cost

Answer 17

total costs of production/output

Question 18

Long run average cost

Answer 18

long run total costs/output

Question 19

Economies of Scale

Answer 19

As output increases, long-run average costs fall

Question 20

Diseconomies of scale

Answer 20

As output increases, long-run average costs rise

Question 21

Technical Economies of Scale

Answer 21

A cost saving generated through changes to the ‘productive process’ as the scale of production and the level of output increase

Question 22

What are the 6 types of economies of scale?

Answer 22

Technical, Managerial, Marketing, Financial (Capital raising), Risk-bearing and Economies of scope

Question 23

What are the 3 types of diseconomies of scale?

Answer 23

Managerial, Communication and Motivational

Question 24

Internal Economies of scale

Answer 24

Cost saving resulting from the growth of the firm itself

Question 25

External economies of scale

Answer 25

Cost saving resulting from the growth of the industry or market of which the firm is a part

Question 26

Total revenue

Answer 26

All the money received by a firm from selling its total output

Question 27

Average revenue

Answer 27

Total revenue/output; in a single product firm, average revenue equals the price of the product

Question 28

Profit

Answer 28

The difference between total sales revenue and total cost of production