Unit 3- Production

Question 1

Define production

Answer 1

Converts inputs or factor services into output of goods and services

Question 2

Define short run production

Answer 2

Occurs when a firm adds variable factors of production to fixed factors of production

Question 3

Define long run production

Answer 3

Occurs when a firm changes the scale of all the factors of production

Question 4

Define productivity

Answer 4

Output per unit of input

Question 5

Labour/capital productivity

Answer 5

Output per worker or unit of capital

Question 6

Define productivity gap

Answer 6

The difference between labour productivity in the UK and other developed economy’s

Question 7

Define specialisation

Answer 7

A worker only performing one task or a narrow range of tasks. Also different firms specialising in producing different goods or services

Question 8

Define division of labour

Answer 8

This concept goes hand in hand with specialisation. Different works perform different tasks in the course of producing a good or service

Question 9

Define exchange

Answer 9

To give something in return for something else eg money is a form of exchange

Question 10

Define short run

Answer 10

The short run is the time period in which at least one factor of production is fixed and cannot be varied

Question 11

Define long run

Answer 11

The long run is the time period in which no factors of production are fixed and in which all the factors of production can be varied

Question 12

Define fixed cost

Answer 12

Cost of production which in the short run doesn’t change with output

Question 13

Define variable cost

Answer 13

Cost of production which changes with the amount that is produced even in the short run

Question 14

Define total cost

Answer 14

The whole cost of producing a particular level of output

Question 15

Define average cost

Answer 15

The total cost of production divided by output

Question 16

Define long run average cost

Answer 16

Long run total cost divided by output

Question 17

Define economy of scale

Answer 17

As output increases long run average cost falls

Question 18

Define diseconomy of scale

Answer 18

As output increases long run average cost rises

Question 19

Define technical economy of scale

Answer 19

A cost saving generate through changes to the productive process as the scale of production and the level of output increases

Question 20

Define internal economy of scale

Answer 20

Cost saving resulting from the growth of the firm itself

Question 21

Define external economy of scale

Answer 21

Cost saving resulting from the growth of the industry or market of which the firm is a part of

Question 22

Define total revenue

Answer 22

All the money recorded by a firm from selling its total output

Question 23

Define average revenue

Answer 23

Total revenue divided by output in a single product firm average revenue equals the price of the product

Question 24

Define profit

Answer 24

The difference between the total sales revenue and total cost of production

Question 25

Define technical economy of scale

Answer 25

A cost saving generated through changes to the productive processes as the scale of production and level of output increases

Question 26

Define internal economy of scale

Answer 26

Cost saving resulting from the growth of firm itself

Question 27

External economy of scale

Answer 27

Cost saving generated resulting from the growth of the industry or market of which the firm is a part of