Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Micro Econ > Production, Costs And Revenue > Flashcards

Production, Costs And Revenue Flashcards

1
Q

Productivity

A

Output per unit of input

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Labour productivity

A

Output per worker

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Capital productivity

A

Output per unit of capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Specialisation

A

A worker performing only one or few tasks within the workplace
A firm specialises in producing a certain product

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Division of labour

A

Each worker performs a different task within a firm in the course of producing a good/service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Benefits of DoL/specialisation

A

Workers won’t have to switch between tasks (time saving)
More + better machinery can be employed
Workers become more efficient due to ‘practice makes perfect’

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

Negatives of DoL/specialisation

A

Workers can get bored which reduces motivation and therefore productivity.
Specialised firms aren’t flexible.
Specialised countries rely heavily on trade.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Trade

A

The buying/selling of a good or service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Exchange

A

To give something in return for something else e.g : money

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Short run

A

At least one factor of production is fixed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Long run

A

All factors are variable

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Marginal returns of labour

A

The addition of to total output bought about by adding one more worker to the labour force

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Law of diminishing marginal returns

A

(Short term) as a variable factor of production is added to a fixed factor of production, both marginal and average returns to the variable factor will begin to fall

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Total returns

A

The whole output produced by all factors of production employed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Average returns to labour

A

Total output ➗ number of workers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

Returns to scale

A

(Long run) The rate which output changes if the scale of all the factors of production is changed. E.g: to avoid diminishing returns to scale a firm may invest in a larger workspace to fit more workers and make space for higher output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

Increasing returns to scale

A

When the scale of all the factors of production employed increases, output increases at a faster rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Constant returns to scale

A

When the scale of all the factors of production employed increases, output increases at the same rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Decreasing returns to scale

A

When the scale of all the factors of production employed increases, output increases at a slower rate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Total costs

A

TC = total fixed cost + total variable costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Average total cost

A

ATC= average fixed cost + average variable cost

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Fixed cost

A

Cost of production that doesn’t change with output (short run) e.g: rent or capital

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Variable cost

A

Cost of production that changes with the amount that is produced (short run and long run) e.g: wages or raw materials

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Average variable cost

A

AVC= total variable cost ➗ size of putput

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Marginal cost

A

MC = the addition to total cost after producing one extra unit of output

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Average fixed costs

A

AFC= total fixed cost ➗ output

27
Q

Average total cost

A

ATC = average fixed cost + average variable cost

28
Q

What do firms aim to maximise

A

Assumed profit max

29
Q

What do consumers aim to maximise

A

Assumed utility max

30
Q

Where is profit max on an ATC curve

A

Lowest point on the curve indicates highest output at lowest cost

31
Q

Economies of scale

A

As output increases, long run average cost falls

32
Q

Diseconomies of scale

A

As output increases, long run average cost rises

33
Q

Internal economies of scale

A

Technical
Managerial
Marketing
Financial/capital raising
Risk-bearing
Economies of scope

34
Q

External economies of scale

A

Managerial
Communication failure
Motivational

35
Q

Technical economies of scale (internal)

A

Changes to the ‘productive process’
Caused by invisibilities, spreading of R&D costs, volume economies , economies of massed resources and economies of vertically linked processes

36
Q

Managerial economies of scale (internal)

A

The larger the scale of the firm, the more they will benefit from specialisation within management

37
Q

Marketing economies of scale (internal)

A

Bulk-buying to reduce costs and keep output high, large firms can use their market power to buy supplies at a lower price and/or market their products on better terms negotiated with wholesalers and retailers

38
Q

Financial economies of scale (internal)

A

Relate bulk buying to finance their businesses expansion, large firms can borrow more from banks at a lower rate

39
Q

Risk bearing economies of scale (internal)

A

Larger firms are less exposed to risks than smaller firms since they can spread the risks across the business by diversifying their goods

40
Q

Economies of scope

A

Factors that make it cheaper to produce a range of products together than search separately

41
Q

Economies of scope

A

Factors that make it cheaper to produce a range of good rather than each separately

42
Q

Managerial diseconomies of scale (external)

A

As a firm grows, control of management gets harder, personnel who lack appropriate experience can make bad decisions leading to higher costs for the firms

43
Q

Communication failure (external)

A

There may be too many layers of management within a large firm, this can lead to miscommunication and staff feeling undervalued, leading to a fall in productivity and therefore raising costs. This is not aided by problems not being effectively addressed

44
Q

Motivational diseconomies of scale (external)

A

Larger firms struggle to motivate workers, over specialisation can lead to workers getting bored and reduce their incentives to aid employers

45
Q

MES

A

MES = minimum efficient scale, the flat bottom area of an ATC curve showing how exhaustion of economies of scale not immediately leading to diseconomies of scale

46
Q

Long run marginal costs

A

The additional cost incurred if a firm increases output when all factors of production are variable

47
Q

Average revenue

A

Total revenue ➗ output

48
Q

Total revenue

A

All the money a firm earns from sales

49
Q

Marginal revenue

A

The addition to total revenue resulting in the sale of an extra unit of output
Change in total revenue ➗ change in output

50
Q

On a monopoly diagram, which curves represent demand and supply

A

Average revenue = demand
Marginal cost = supply

51
Q

Relationship between marginal and average revenue

A

Marginal > average, average rises
Marginal < average, average falls
Marginal = average, average is constant

52
Q

Conditions of perfect competition

A

Large number of buyers and sellers
Low barriers to entry/exit
Perfect information
Price takers
Homogeneous goods

53
Q

Price maker and price taker demand curves

A

Price taker curve = perfectly elastic (horizontal)
Price maker curve = downward sloping

54
Q

Total Profit

A

Total revenue - total costs

55
Q

Profit maximisation

A

Firms are assumed to aim for profit max, the level of output where total profit is greatest

56
Q

Normal profits

A

Minimum profit a firm can make to stay in business

57
Q

Supernormal profits

A

Extra profit, above the normal profit. Can be used to invest in R&D
Acts as a magnet for new firms to join the market due to the attraction of higher profits

58
Q

Roles of profit in a market economy

A

Creates worker incentives
Creates shareholder incentives
Resource allocation
A reward for innovation + risk taking
Source of business finance

59
Q

Invention

A

Making something new, that hasn’t existed before

60
Q

Innovation

A

Improvements on something that has already been invented

61
Q

How technological change affects economic performance

A

Methods of production
Productivity
Efficiency
Costs of production

62
Q

Productive efficiency

A

Bottom of the ATC curve, occurs when it is impossible to produce more of one good without producing less of another

63
Q

Dynamic efficiency

A

Measures improvements in productive efficiency that occur in the long run

64
Q

Creative destruction

A

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

Micro Econ (5 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions