Revenue And Costs

Question 1

Marginal revenue/marginal cost

Answer 1

The change in revenue from selling one extra unit/ the extra cost from produc one extra unit

Question 2

Short run

Answer 2

A time period in which at least one factor of production is fixed

Question 3

Long run

Answer 3

Is a time period in which all factors of production are variable

Question 4

Fixed costs/variable costs

Answer 4

Costs that do not change with output/ costs that vary with output (fixed+variable=total costs)

Question 5

Law of diminishing marginal returns?

Answer 5

This concept explains why marginal costs begin to rise. Occurs when fixed factors of production are over utilised, causing marginal costs to rise in the short run. As you add more labour, Total product begins to rise, with each extra worker adding more than the last(due to the benefits of specialisation) shown by an increase in marginal product. Marginal cost also falls because MC= Wage/MP and the wages in constant. Then as fixed factors of production become over utilised, the MP of each additional worker begins to decrease(not enough space) and MC starts to rise.