Production, Costs And Revenue

Question 1

Economy of scale

Answer 1

As output increases, long-run average cost falls

Question 2

Diseconomy of scale

Answer 2

As output increases, long-run average cost rises

Question 3

Internal economies and diseconomies of scale

Answer 3

Changes in long-run average costs of production resulting from changes in the size or scale of a firm or plant

Question 4

Minimum efficient scale

Answer 4

The lowest output at which the firm is able to produce at the minimum achievable LRAC

Question 5

External economy of scale

Answer 5

A fall in long-run average costs of production resulting from the growth of the market or industry of which the firm is a part

Question 6

External diseconomy of scale

Answer 6

An increase in long-run average costs of production resulting from the growth of the market or industry of which the firm is a part

Question 7

Marginal revenue

Answer 7

Addition to total revenue resulting from the sale of one more unit of the product

Question 8

Productive efficiency

Answer 8

The level of output at which average costs of production are minimised

Question 9

Dynamic efficiency

Answer 9

Occurs in the long run leading to the development of new products and more processes that improve productive efficiency

Question 10

Monopolistic competition

Answer 10

A market structure in which firms have many competitors, but each one sells a slightly different product

Question 11

Creative destruction

Answer 11

Capitalism evolving and renewing itself over time through new technologies and innovations replacing older technologies and innovations