Production,costs And Revenues Flashcards
What are the different types of economies of scale
Technical
Managerial
Marketing
Financial
Risk bearing
Types of diseconomies of scale
Managerial
Communication failure
Motivational
financial
marketing
bulk buying
specialisation
Define economies of scale
Falling LRACs of production that result in the increasing scale or size of a firm
When do diseconomies of scale occur
When an increase in output leads to a rising LRACs of production
What does the L shaped LRAC curve assume
Substantial economies of scale that don’t turn into diseconomies and instead flatten out lrac
The size of the firm is MES
What is MES
Minimum efficient scale
3 main types of technical economies of scale
Indivisibilities- minimum size below which they cannot efficiently operate
Spread of R&D
Volume - increasing scale of plant allows to conserve heat and energy
What is associated with managerial economies of scale
Specialisation and division of labour
How can firms spread risks
Diversifying their output,markets, supply and finances
What is managerial diseconomies of scale
When managerial functions are reduces and bad decisions are made
Define internal economies of scale
Cost saving resulting from the growth of the firm itself
What is an external economy of scale
Cost saving as a result of growth of the MARKET the firm is in
What allowed car manufacturing to benefit of economies of scale
Henry Fords adaptation of the moving assembly line
What is total revenue
All the money a firm earns from selling the total output of a product
How is average revenue calculated
AR= total revenue / output
How is total profit calculated
Total revenue - total costs
What is production
Production converts inputs into outputs of goods and services
Short run production
Occurs when a firm adds variable factors of production to fixed factors