production costs and revenues

Question 1

automation

Answer 1

automatic control; the process by which machines control other machines

Question 2

average cost

Answer 2

total production cost divided by the total output ( cost per unit of output)

Question 2

average revenue

Answer 2

TR/Total output ( revenue per unit of output)

Question 3

capacity productivity

Answer 3

output per unit of capital

Question 4

constant returns to scale

Answer 4

When output increases by an equal proportion the increase in inputs

Question 5

diseconomies of scale

Answer 5

when long-run average costs rise as output rises

Question 6

decreasing returns to scale

Answer 6

when output increases by a smaller proportion than the increase in inputs

Question 7

division of labour

Answer 7

different works performing different tasks in a good’s/ services’ production, specialising to an extent

Question 8

economies of scope

Answer 8

when it’s cheaper to make a range of products

Question 9

economies of scale

Answer 9

when long-run average costs fall as output rises

Question 10

external economy of scale

Answer 10

firms saving resulting from growth of the industry a firm is part of

Question 11

fixed cost

Answer 11

costs of production that do not vary with output, only in the short run

Question 12

increasing returns to scale

Answer 12

when output increases by a larger proportion than the increase in inputs

Question 13

internal economy of scale

Answer 13

firms saving resulting from growth of the firm itself

Question 14

labour productivity

Answer 14

output per worker

Question 15

law of diminishing returns

Answer 15

by continually adding variable factors atop fixed factors, eventually, both average and marginal returns to the fixed factor far

Question 16

long run

Answer 16

the time period in which none of the factors of production are fixed, and all can be varied

Question 17

long-run average cost

Answer 17

long-run total cost per unit of output

Question 18

long-run production

Answer 18

when a firm changes the scale of all factors of production

Question 19

mechanisation

Answer 19

when a firm transfers from becoming more labour intense to becoming more capital intensive

Question 20

minimum efficient scale (MES)

Answer 20

The lowest level of output at which average costs are minimised. Dependent on the market structure as well as barriers to entry

Question 21

normal profit

Answer 21

TR=TC; the minimum profit required to keep aa firm operating in an industry

Question 22

operating costs

Answer 22

same as variable costs

Question 23

overheads

Answer 23

same as fixed costs

Question 24

production

Answer 24

A set of processes that converts inputs into outputs

Question 25

productive efficiency

Answer 25

minimised average total cost

Question 26

productivity

Answer 26

output per unit of input

Question 27

profit

Answer 27

total revenue subtract total costs

Question 28

rate of return

Answer 28

income received from an investment

Question 29

returns to scale

Answer 29

the scale by which a firm’s output changes as the scale of all inputs are altered

Question 30

short run

Answer 30

time period in which at least one of the factors of production are fixed and cannot be varied

Question 31

specialisation

Answer 31

a worker only performing a specific task or a small range of tasks

Question 32

sunk cost

Answer 32

non-recoverable costs of entering a market

Question 33

supernormal (abnormal) profit

Answer 33

any level of profit over and above normal profit

Question 34

technical economy of scale

Answer 34

cost saving through changing the production process

Question 35

total cost

Answer 35

total fixed cost added to total variable cost