Production, Costs and Revenue

Question 1

Production

Answer 1

Conversion Of factor inputs into final outputs

Question 2

Total Factor Productivity

Answer 2

Output of all factors of production

Question 3

Labour Productivity

Answer 3

Output per worker

Question 4

Capital Productivity

Answer 4

Output per unit of capital

Question 5

Factor Productivity

Answer 5

Average output of all factors of production

Question 6

Productive Efficiency

Answer 6

A firm uses the minimum inputs to produce the maximum output at the lowest cost

Question 7

Economies Of Scale

Answer 7

As output increases unit costs decrease

Question 8

Diseconomies Of Scale

Answer 8

As output increases unit costs rise

Question 9

Economies Of Scale Examples

Answer 9

Specialisation
Better management
Purchasing economies reduce costs

Question 10

Diseconomies Of Scale Examples

Answer 10

Lack of communication
Lack of coordination
Bureaucracy

Question 11

Bureaucracy

Answer 11

Where large organisations have overly complex administrative procedures

Question 12

Specialisation

Answer 12

Firms concentrate on producing specific goods or services

Question 13

Benefits Of Specialisation

Answer 13

Increases output
Each economic unit specialise in what they are best at
Efficient use of time
Improved division of labour

Question 14

Specialisation Disadvantages

Answer 14

Repetitive work reduces motivation

May not be able to find alternative work with only specific skills

Question 15

Short Run

Answer 15

The time period in which a minimum of one factor of production is fixed

Question 16

Long Run

Answer 16

The time period in which no factors of production are fixed

Question 17

Fixed Cost

Answer 17

Costs that don’t vary with output

E.g Rent

Question 18

Variable Costs

Answer 18

Costs that vary with output

E.g Raw material costs

Question 19

Total Cost

Answer 19

Fixed Cost + Variable Cost

Question 20

Average Costs

Answer 20

Average cost of producing a unit of output

Total cost / Output

Question 21

Internal Economies Of Scale

Answer 21

Occur due to an increase in the scale of production of a firm

Question 22

External Economies Of Scale

Answer 22

An increase in the scale of production within the industry
Improved infrastructure
Suppliers located nearby

Question 23

Purchasing Economies

Answer 23

Firms buy I bulk to secure lower prices per unit

Question 24

Technical Economies

Answer 24

Bigger and more efficient machinery
Lower costs per unit
More spent on research and development

Question 25

Marketing Economies

Answer 25

Spread advertising and marketing costs over greater output

Question 26

Managerial Economies

Answer 26

Employing specialist labour

Greater division of labour

Question 27

Financial Economies

Answer 27

Better credit ratings so can borrow at lower interest rates

Question 28

Total Revenue

Answer 28

Money received by a firm from the sale of goods and services

Question 29

Average Revenue

Answer 29

Total revenue divided by output