Production, costs and revenue Flashcards
Define factors of production
inputs into the production process, such as land, labour, capital and enterprise
What is land in the fop
the part of the earth’s cust which the firm owns or hires
What is labour in the fop
all people employed by the firm who are paid wages or salaries
what is capital in the fop
the captial goods which the firm owns or hires
what is entrepreneurs in the fop
the people who decide what to produce, how to produce, for whom to produce it.
What is labour productvity
output per worker
what is capital productivity
output per unit of capital
What is a firm
it is a business enterprise that either produces or deals in and exchanges goods or services
What is specialisation
a worker only performing one task or a narrow range of tasks
or..
different firms specialising in producing different goods or services
what is the division of labour
different workers perform different tasks in the course of producing a good or service
What happenes when a specialisaton occurs
- a worker will not need to switch between tasks so saves time
- more and better machinery
- practice makes perfect
what is the marginal returns of labour
changing the amount of output which leads to one more worker
What is the difference between trade and exchange
trade is the buying and selling of goods and services
exchange is to give something in return for something else
what is the law of diminishing marginal returns/law of diminishing marginal productivity
states that as a variable factor of production is added to a fixed factor of production, both the marginal and eventually the average returns will begin to fall
what is marginal returns
adding an additional factor of production results in smaller increases in output
what is average revenue
the revenue that is earned per unit of output
what is meant by the term ‘returns to scale’
the rate by which output changes if the scale of all the factors of production is changes
What is a plant in economics
an establishment, such as a factory, a workshop or a retailed outlet, owned and operated by a firm
what are the 3 ‘returns to scale’
increasing returns to scale
decreasing returns to scale
constant returns to scale
what is increasing returns to scale
when an increase in the scale of all the factors of production causes a more than proportionate increase in output
what is a constant returns to scale
when an increase in the scale of all the factors of production causes the same proportionate increase in output
what is decreasing returns to scale
when an increase in the scale of all the factors of production causes a less than proportionate increase in output
what is the formula for (average) total cost
(average) total cost= (average) total fixed cost + (average) total variable cost
what is fixed cost
cost of production which in the short run does not change with output
what is variable cost
cost of production which changes with the amount that is produced, even in the short run
what is economies of scale
a fall in long run average costs of production from an increase in size of a firm
what is diseconomies of scale
an increasing long run average cost of production from an increase in a size of a firm
what is the difference between internal economies of scale and external
internal is from the firm and external is from the growth of a market or industry which the firm is part of
what is the formula for average revenue
total revenue/output
what is the formula for marginal revenue
change in total revenue/ change in output
what is the formula for total profit
total revenue-total costs
what is profit maximisation
occurs at the level of output at which total profit is greatest
what is the difference betwteen normal profit and abnormal/supernormal profit
normal profit is the minimum to stay in business
abnormal is when profit is above normal
what is technological change
used to describe the effect of invention and the spread of technology in the economy
what is productive efficiency
centres on minimising average costs of production
what is dynamic efficiency
measure the extent to which productive efficiency increases over time
what is monopolistic competition
a market structure in which firms have many competitors, but each sells a slightly different product
what is duopoly
two firms only in a market
what is creative destruction
evolving and renewing itself over time through new technologies and innovation replacing old ones
