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
