Production, Costs & Revenue (12) (AS overall)

Question 1

What are fixed costs?

Answer 1

Costs paid regardless of output.

Question 2

What are Variable costs?

Answer 2

Costs paid that vary directly with output.

Question 3

What are and how do you calculate total costs?

Answer 3

Total costs equal fixed costs plus variable costs and this is the total cost of something.

Question 4

What is and how do you calculate the total revenue?

Answer 4

Total revenue is the overall amount of money made and is calculated by price per unit times quantity of units sold.

Question 5

How do you calculate profits and average costs?

Answer 5

To calculate profits or losses you do total revenue minus total costs. Average costs are calculated by total cost divided by total output.

Question 6

What are marginal costs?

Answer 6

The additional cost incurred in the production of one more unit of a good or service. If marginal cost is greater than what you’d sell the unit for you don’t produce the extra unit.

Question 7

What two things are satisfied when average costs are lowest?

Answer 7

Firms are able to maximise their profit and economists see firms producing efficiently.

Question 8

In economics what is the short run?

Answer 8

The period of time in which one factor of production is set or fixed.

Question 9

In economics what is the long run?

Answer 9

The period of time in which all factors of production and resources are variable so the scale of production is variable.

Question 10

What are economies of scale and when do they occur?

Answer 10

They are the cost benefits of being a bigger company organisation over a smaller one. They occur when average costs for due to increased scale of production.

Question 11

What are the five internal economies of scale and how do they work?

Answer 11

Tony’s Mother Found My Rabbit Technical - use of technical machinery Marketing – bulk buying to lower cost per unitFinancial - lower interest rates because they’re seen as safer investmentsManagerial - hire specific/focused managersRisk bearing - spread risk over large areas to reduce the chance of losing out overall

Question 12

What are diseconomies of scale?

Answer 12

The negative cost impacts of when a company gets too big and is less efficient.

Question 13

What causes diseconomies of scale?

Answer 13

Control - decisions take longer because there are more people involvedCommunication - broken lines of communicationCoordination - trying to juggle too many things Corporation - employees feeling insignificant so choose not to cooperate

Question 14

What are external economies of scale?

Answer 14

The falling average costs as an industry grows.

Question 15

What causes external economies of scale?

Answer 15

Pool of skilled labour force - lower training costs - Specialist supplier of raw materials - Specialised services - banking and education - Specialised market - Lloyd’s of London - Improved infrastructure - better roads

Question 16

What are external diseconomies of scale?

Answer 16

The rising average costs as an industry grows.

Question 17

What causes external diseconomies of scale?

Answer 17

Increased demand for resources leads to a higher price for them. Increased volume of traffic congestion leads to increased travel costs.

Question 18

What is specialisation?

Answer 18

A system of organisation where by economic agents such as individuals and businesses or nations concentrate on producing a certain good or service.

Question 19

What is needed for specialisation to work?

Answer 19

Trade/markets and an efficient means of exchanging goods or services for money.

Question 20

What is the division of labour?

Answer 20

This is where a production process is broken down into separate tasks, each worker specialises in one particular operation.

Question 21

What are the positives and negative’s of the division of labour?

Answer 21

Positive - Less time wasted between jobs - Less training for workers - Specialist machines - Products always equal quality - Often lower average costsNegative - Fewer tradable skills - Workers may bore quickly - High initial investment costs - Risk of overspecialisation

Question 22

What may the effective division of labour lead to?

Answer 22

Increased price competitiveness Better quality products Increased profit margins

Question 23

What occurs in the short run and what occurs in the long run?

Answer 23

Short run - specialisation Long run - economies of scale

Question 24

What is productivity and what is its unit?

Answer 24

Productivity is a measure of the efficiency of the production process is unit is output per unit of input.

Question 25

How do you calculate productivity?

Answer 25

Total output divided by total number of workers.

Question 26

Why is productivity important?

Answer 26

It’s allows you to produce goods and services at a lower cost per unit increases the total output from our scarce factor resources Improved productivity allows an economy to grow

Question 27

What is the productivity gap?

Answer 27

The difference in productivity between the most productive Nations and the UK.

Question 28

What is making a donation is more productive?

Answer 28

USA - best technology USA - no employment protection USA - no welfare stateFrance - shorter days and longer breaks makes them more efficient

Question 29

What factors can increase productivity?

Answer 29

Specialisation TrainingRewards and performance related pay Increased job satisfaction Quality and levels of machineryWorking practices and techniques

Question 30

Why are The UK less productive than other nations?

Answer 30

Low rate of capital investmentLittle spending on research and development Skills of the labour forceBreath of product range Lack of significant healthy competition

Question 31

What is productivity?

Answer 31

A measure of how efficient the production process is at how efficiently does the process turn inputs into outputs.

Question 32

What are the main determinants of labour productivity?

Answer 32

The machinery/equipment and the hours labour is worked. & with what breaks.

Question 33

How could the business improve their labour productivity?

Answer 33

Improving the quality of or increasing the quantity of machinery for the labour force.

Question 34

The greater the productivity..?

Answer 34

The more of something is produced for a given number of inputs.

Question 35

What is the labour-intensive process?

Answer 35

A process that is heavy in physical workers/labour force.

Question 36

Why should you find a balance between productivity and quality?

Answer 36

So you have low average costs but also reasonable quality products that people are willing to buy.

Question 37

What are the possible strategies to increase productivity in the British economy?

Answer 37

Increase competitiveness of marketsMore investment in education and trainingImprove the countries infrastructureEncourage foreign investmentIncentivise more R&D spendingIncrease capital investmentImprove management and entrepreneurshipIncentivise the start-up of small businesses

Question 38

What are the economic benefits of higher productivity?

Answer 38

Lower average costsImprove competitiveness in international marketsHigher profitsHigher real wagesLong run economic growth