production, costs and revenue Flashcards
production
The total output of goods and services produced by an individual, firm or country
short run production
a period during which at least one factor of production is fixed. Typically, this factor is capital, such as machinery or buildings. In the short run, firms can only adjust variable inputs like labor and raw materials to meet changes in demand.
long run production
The long run is a situation in economics wherein all factors of production and costs are variable. The long run allows firms to operate and adjust all costs. (There are also a variable number of producers in the market, which means firms are able to enter and leave the market during times of profitability and loss. In the long run, profits are ordinary, so there are no economic profits. While a firm may be a monopoly in the short term, it may expect competition in the long run.)
productivity
a measrurment of the rate of production by one or more factors of production
labour productivity
output per worker per unit of time/
the amount of real gross domestic product (GDP) produced by an hour of labor. Growth in labor productivity depends on three main factors: saving and investment in physical capital, new technology, and human capital.
capital productivity
output per unit of capital
productivity gap
the difference between labour productivity e.g., in the Uk and in other developed economies
specialisation
We’re an individual worker, firm, region or country produces a limited range of goods or services
Division of Labour
specialisation at the level of an individual worker
Trade
the Buying and setting of goods and /or services
exchange
To give something in return for Something else received. Is a medium of exchange
Short run
A period of time in which the availability of at least one factor of production is fixed
Long run
A period of time over which all factors of production can be varied And this may increase or reduce its scale of output
Marginal returns
The change in quantity of total output resulting from the employment of one more Worker holding all the other factors of production fixed
Average returns
Total output divided by the total number of workers employed
Total returns
total output produced by all the workers employed by firm
Law of diminishing returns
When additional units of variable factors of production are added to a fixed factor, marginal output or product will eventually decrease
Constant returns to scale
Where an increase in the quantity of a firm’s inputs leads to a proportionately identical change in output
Increasing returns to scale
Aware an increase in the quantity of a firm’s inputs leads to a proportionally greater change in output
Decreasing returns to scale
Where an increase in the quantity of a firm’s inputs leads to a proportionally lower change in output
Returns to scale
The relationship between increases in the quantity of a firm’s inputs and the proportional change in outputs
Marginal cost
The addition to a firm’s total costs from making an additional unit of output
Total costs
The Addition of fixed costs and variable costs to a given level of output
Average total cost
Total cost of production divided by the number of units of output
long run average cost
Long run average cost is the cost per unit of output feasible when all factors of production are variable
technical economy of scale
And larger businesses can generally afford the latest specialist capital equipment which is often very expensive.
internal economies of scale
reductions in long run average total costs arising from growth of the firm
external economies of scale
reductions in long run average total costs arising from growth of the industry in which it operates in
diseconomies of scale
increases in average total costs that firms ma experience by increasing output in the long run
minimum efficent scale
The lowest level of output at which average total cost of production are minimised
Total revenue
the money a farm receives from selling its output, calculated by price times quantity sold
Average revenue
Total revenue divided by units of output. Equal to price in a firm that sells 1 product at a fixed price
Marginal revenue
The addition to a firms total revenue from selling an additional unit of output
Perfect competition
A market that displays the six conditions of: a large Number of buyers and sellers, perfect market information, the ability to buy and sell as much is desired at the ruling market price, the inability of an individual buyer or seller to influence the market price, a uniform or homogeneous product, anti no barriers to entry or exit in the long run
Monopoly
One firm only in a market/ Monopolistic competition- a market structure in which firms have many competitors but each one sells a slightly different product
Price taker
A firm which is so small that there has to accept the roiling price. If the firm raises its price it loses all of its sales if it cuts its price it gains no advantage
Price maker
When a firm faces a downward sloping demand curve for its own product, it possesses the market power to set the price at which it sells the product
Quantity setter
Profit
The difference between total revenue and total costs
Normal profit
The minimum level of profit required to reward the entrepreneur for taking a risk and therefore to stay in a particular line of business
Supernormal profit
Profit over and above normal profit, sometimes referred to as abnormal or access profit
Invention
The creation of a product or process
Innovation
New products and production processes that are developed into marketable goods or services
Technological change
A time is to describe the overall effect of invention, innovation and the diffusion or spread of technology in the economy
Creative destruction
Where technology change leads to the development of new disruptive products that render existing products obsolete
Productive efficiency
For the economy as a whole occurs when it is impossible to reduce more of one good without producing less of another. It’s a cause when the average total cost of production is minimised
Dynamic efficiency
Measures improvements in productive efficiency that occur in the long run over time
