Production, Costs And Revenue Flashcards
Average cost
total production /output (cost per unit of output)
Average revenue eq
Total revenue divided by total output (revenue per unit of output)
Capital productivity
Output per unit capital
Diseconomies of scale
When long-run average costs rise as output rises
Division of labour
Different workers performing different tasks in a good/service’s production
External economy of scale
When a firm benefits from the industry its apart of (out of its control)
Fixed costs
Costs of production that do not vary with output, only in the short run
Internal economies of scale
Benefits from growth of the firm itself
Labour productivity
Output per worker
Long run
Time period in whereall Fops are variable
Long- run average cost
Long-run total costs per unit of output
Long-run production
When a firm changes the scale of all fops
Production
The combination of FoPs (inputs) into finished products (outputs)
Productive efficiency
Minimised average total cost
Productivity
Output per unit of input
Profit eq
Total revenue - total cost
Short run
Time period in which at least one of the fops are fixed and cannot be varied
Specialisations
A worker only performing a specific task or a small range of tasks
Technical economy of scale
Cost saving through changing the production process
Total cost eq
FC + VC
Total revenue eq
Price X Quantity
Variable cost
Costs that do vary with output
Output
the quantity of finished goods/services
what are some factors affecting labour productivity
wage rate, technology, management, education/skills
what are some advantages of specialisation
gives workers times to gain skills for one particular job, firms can be more efficient, makes a bigger task manageable
Money
an object used as a medium of exchange between two parties
average total cost eq
TC/Q
average variable costs eq
VC/Q
Average fixed costs eq
FC/Q
why are average cost curves u-shaped in the short run
Due to the law of diminishing returns
when do AFC decline
When there is higher output, because fixed costs are independent of output
diminishing marginal returns
when employing extra workers leads to declining productivity
Total profit
the total output produced by all workers
Marginal product
Output produced by an extra worker
diminishing returns
occur in the short-run, when one factor is fixed. If the variable factor increased, there will come a point where it will be less productive
what happens to MC when diminishing returns occur
Decreaseing marginal product (MP) and increasing marginal cost (MC)
where does the MC curve cut the SRAC curve
At its lowest point
returns to scale
The relationship between increasing the quantity of input and the impact on output
constant returns to scale
when output increases by the same proportion as the change in inputs
increasing returns to scale
If output increases by more than the proportional change in input
decreasing returns to scale
if output increases by less than the proportional change in input
economies of scale
occur when LRAC fall with increasing output
internal economies of scale
when an individual firm becomes more efficient
types of internal economies of scale
Specialisation and division of labour, bulk buying, technical, financial economies, marketing, risk bearing
external economies of scale
when a firm benefits from the whole industry getting bigger. Outside of its control
reasons for diseconomies of scale
poor communication, alienation, lack of control
average revenue eq
TR/Q
Marginal revenue
the extra revenue gained from selling an extra unit
