Production, costs and revenue

Question 1

production

Answer 1

the use of factors of production to convert input into output

Question 2

productivity

Answer 2

a measure of efficiency of production

Question 3

labour productivity

Answer 3

output per worker per unit of time

Question 4

capital productivity

Answer 4

output per unit of capital

Question 5

productivity equation

Answer 5

total output per period of time/number of units of labour

Question 6

short run production

Answer 6

a period of time in which the availability of at least one factor of production is fixed

Question 7

long run production

Answer 7

occurs when a firm changes the scale of all factors of production

Question 8

specialisation

Answer 8

where an individual, firm, region or country produces a limited range of goods/services

Question 9

4 advs of specialisation

Answer 9

1. greater allocative efficiency
2. reduced production costs
3. higher productivity through better use of worker
4. quality improvements

Question 10

4 disadvs of specialisation

Answer 10

1. finite resources
2. changes in fashion and trends
3. national interdependence
4. deindustrialisation = high unemployment

Question 11

division of labour

Answer 11

specialisation of an individual worker

Question 12

3 avds of division of labour

Answer 12

1. workers are highly productive
2. quality improvements
3. lower prices for consumers

Question 13

3 disadvs of division of labour

Answer 13

1. demotivation of workers
2. deskilling
3. highly standardised goods/services

Question 14

exchange

Answer 14

where one thing is traded for something else

Question 15

specialisation and division of labour are only viable if…

Answer 15

an efficient form of exchange exists

Question 16

4 functions of money

Answer 16

1. measure of value
2. medium of exchange
3. store of value
4. deferred payment

Question 17

fixed costs

Answer 17

costs that stay the same irrespective of output

Question 18

variable costs

Answer 18

costs that vary with level of output

Question 19

total costs

Answer 19

overall price a firm pays for running a business

Question 20

marginal cost

Answer 20

the cost of producing an additional unit of output

Question 21

average cost calculation

Answer 21

total costs/quantity

Question 22

knowing average costs helps a firm …

Answer 22

choose a price that will make a profit

Question 23

average fixed cost formula

Answer 23

fixed costs/quantity

Question 24

average variable costs formula

Answer 24

variable costs/quantity

Question 25

average total costs formula

Answer 25

total costs/quantity

Question 26

minimum efficient scale

Answer 26

the point of production that has the lowest average cost and where the economies of scale have been fully utilised

Question 27

economy of scale

Answer 27

as output increases, average total costs decrease

Question 28

economies of scale

Answer 28

the reduced average total costs that firms experience by increasing output in the long run

Question 29

5 internal economies of scale

Answer 29

1. financial economies
2. purchasing economies
3. risk-bearing economies
4. managerial economies
5. specialisation and division of labour economies

Question 30

3 external economies of scale

Answer 30

1. better transport infrastructure
2. component supplies move closer
3. research and development move closer

Question 31

diseconomy of scale

Answer 31

as output increases, average total costs decrease

Question 32

diseconomies of scale

Answer 32

occur when an increase in output leads to rising average costs of production

Question 33

4 internal diseconomies of scale

Answer 33

1. communication
2. control
3. coordination
4. motivation

Question 34

3 external diseconomies of scale

Answer 34

1. transportation and communication diseconomies
2. supply of worker diseconomies
3. resource competition diseconomies

Question 35

total revenue

Answer 35

the money a firm receives from selling its revenue

Question 36

total revenue formula

Answer 36

quantity x price

Question 37

average revenue

Answer 37

revenue per unit

Question 38

demand curve is the same as …

Answer 38

the average revenue curve