Production, costs and revenue

Question 1

Define factors of production

Answer 1

inputs into the production process, such as land, labour, capital and enterprise

Question 2

What is land in the fop

Answer 2

the part of the earth’s cust which the firm owns or hires

Question 3

What is labour in the fop

Answer 3

all people employed by the firm who are paid wages or salaries

Question 4

what is capital in the fop

Answer 4

the captial goods which the firm owns or hires

Question 5

what is entrepreneurs in the fop

Answer 5

the people who decide what to produce, how to produce, for whom to produce it.

Question 6

What is labour productvity

Answer 6

output per worker

Question 7

what is capital productivity

Answer 7

output per unit of capital

Question 8

What is a firm

Answer 8

it is a business enterprise that either produces or deals in and exchanges goods or services

Question 9

What is specialisation

Answer 9

a worker only performing one task or a narrow range of tasks
or..
different firms specialising in producing different goods or services

Question 10

what is the division of labour

Answer 10

different workers perform different tasks in the course of producing a good or service

Question 11

What happenes when a specialisaton occurs

Answer 11

• a worker will not need to switch between tasks so saves time
• more and better machinery
• practice makes perfect

Question 12

what is the marginal returns of labour

Answer 12

changing the amount of output which leads to one more worker

Question 13

What is the difference between trade and exchange

Answer 13

trade is the buying and selling of goods and services
exchange is to give something in return for something else

Question 14

what is the law of diminishing marginal returns/law of diminishing marginal productivity

Answer 14

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

Question 15

what is marginal returns

Answer 15

adding an additional factor of production results in smaller increases in output

Question 16

what is average revenue

Answer 16

the revenue that is earned per unit of output

Question 17

what is meant by the term ‘returns to scale’

Answer 17

the rate by which output changes if the scale of all the factors of production is changes

Question 18

What is a plant in economics

Answer 18

an establishment, such as a factory, a workshop or a retailed outlet, owned and operated by a firm

Question 19

what are the 3 ‘returns to scale’

Answer 19

increasing returns to scale
decreasing returns to scale
constant returns to scale

Question 20

what is increasing returns to scale

Answer 20

when an increase in the scale of all the factors of production causes a more than proportionate increase in output

Question 21

what is a constant returns to scale

Answer 21

when an increase in the scale of all the factors of production causes the same proportionate increase in output

Question 22

what is decreasing returns to scale

Answer 22

when an increase in the scale of all the factors of production causes a less than proportionate increase in output

Question 23

what is the formula for (average) total cost

Answer 23

(average) total cost= (average) total fixed cost + (average) total variable cost

Question 24

what is fixed cost

Answer 24

cost of production which in the short run does not change with output

Question 25

what is variable cost

Answer 25

cost of production which changes with the amount that is produced, even in the short run

Question 26

what is economies of scale

Answer 26

a fall in long run average costs of production from an increase in size of a firm

Question 27

what is diseconomies of scale

Answer 27

an increasing long run average cost of production from an increase in a size of a firm

Question 28

what is the difference between internal economies of scale and external

Answer 28

internal is from the firm and external is from the growth of a market or industry which the firm is part of

Question 29

what is the formula for average revenue

Answer 29

total revenue/output

Question 30

what is the formula for marginal revenue

Answer 30

change in total revenue/ change in output

Question 31

what is the formula for total profit

Answer 31

total revenue-total costs

Question 32

what is profit maximisation

Answer 32

occurs at the level of output at which total profit is greatest

Question 33

what is the difference betwteen normal profit and abnormal/supernormal profit

Answer 33

normal profit is the minimum to stay in business
abnormal is when profit is above normal

Question 34

what is technological change

Answer 34

used to describe the effect of invention and the spread of technology in the economy

Question 35

what is productive efficiency

Answer 35

centres on minimising average costs of production

Question 36

what is dynamic efficiency

Answer 36

measure the extent to which productive efficiency increases over time

Question 37

what is monopolistic competition

Answer 37

a market structure in which firms have many competitors, but each sells a slightly different product

Question 38

what is duopoly

Answer 38

two firms only in a market

Question 39

what is creative destruction

Answer 39

evolving and renewing itself over time through new technologies and innovation replacing old ones