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A-Level Economics > Unit 4 - Production, Costs and Revenue > Flashcards

Unit 4 - Production, Costs and Revenue Flashcards

1
Q

Production

A

Converts inputs or factor services into outputs of goods and services.

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2
Q

Factors of production

A

Inputs into the production process, such as, land, labour, capital and enterprise

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3
Q

Productivity gap

A

The difference between labour productivity, e.g in the UK and in other economies

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4
Q

Productivity

A

Output per unit of input

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5
Q

Labour productivity

A

Output per worker

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6
Q

Capital productivity

A

Output per unit of capital

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7
Q

Firm

A

A productive organisation which sells its output of goods/services commercially

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8
Q

Specialisation

A

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

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9
Q

Division of labour

A

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

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10
Q

Trade

A

The buying and selling of goods and/or services

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11
Q

Exchange

A

To give something in return for something else received. Money is a medium of exchange

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12
Q

Marginal returns of labour

A

The change in the quantity of total output resulting from the employment of one more worker, holding all other factors of production fixed.

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13
Q

Law of diminishing marginal returns (also known as law of diminishing marginal productivity)

A

A short term law which states that as a variable factor of production is added to a fixed factor of production, both the marginal and eventually the average returns to the variable factor will begin to fall

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14
Q

Total returns

A

The whole output produced by all the factors of production, including labour, employed by a firm

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15
Q

Average returns of labour

A

Total output divided by the total number of workers employed

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16
Q

Returns to scale

A

The rate by which output change last if the scale of all the factors of production is changed

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17
Q

Plant

A

An establishment, such as a factory, a workshop or a retail outlet, owned and operated by a firm.

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18
Q

Increasing returns to scale

A

When all the scale of the factors of production employed increases, output increases at a faster rate

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19
Q

Constant returns to scale

A

When all the scale of all the factors of production employed increases, output increases at the same rate.

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20
Q

Decreasing rate to scale

A

When the scale of all the factors of production employed increases, output increases at a slower rate.

21
Q

Fixed cost

A

Cost of production which, in the short run, does not change with output

22
Q

Variable cost

A

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

23
Q

Average fixed cost

A

Total cost of employing the fixed factors of production to produce a particular level of output, divided by the size of output: AFC = TFC \ Q

24
Q

Average total cost (also known as average cost)

A

Total cost of producing a particular level of output, divided by the size of the output: ATC = AFC + AVC

25
Q

Economies of scale

A

As output increases, long-run average costs fall.

26
Q

Diseconomies of scale

A

As output increases, long-run average costs rises.

27
Q

Internal economies and diseconomies of scale

A

Changes in long-run average cost of production resulting from changes in the size or scale of a firm or plant.

28
Q

External economy of scale

A

A fall in the long-run average costs of production resulting from the growth of the market or industry of which the firm is a part.

29
Q

External diseconomy of scale

A

An increase in long-run average costs of production resulting from the growth of the market or industry of which the firm is a part.

30
Q

Total revenue

A

All the money received by a firm from selling its total output.

31
Q

Average revenue

A

Total revenue divided by output

32
Q

Marginal revenue

A

Addition to total revenue resulting from the sale of one more unit of the product.

33
Q

Monopoly

A

One firm only in a market

34
Q

Perfect competition

A

A market that displays the six conditions of:
-A large number of buyers and sellers
-Perfect market information
-The ability to buy or sell as much is desired at the ruling market price
-The inability of an individual buyer or seller to influence the market price
- A uniform or homogenous product
-No entry or exit in the long run

35
Q

Price-taker

A

A firm which is so small that it has to accept the ruling market price. If the firm raises its price, it loses all of its sales ; if it cuts its price, it gains no advantage.

36
Q

Price- maker

A

When a firm faces a downward-sloping demand curve for its product, it possess the market power to set the price at which it sells the product.

37
Q

Quantity-setter

A

When a firm faces a downward-sloping demand curve for its product, it possess the market power to set the quantity of the good it wishes to sell

38
Q

Profit

A

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

39
Q

Profit maximisation

A

Occurs at the level of output at which total profit is greatest.

40
Q

Normal profit

A

The minimum profit a firm must make to stay in business l, which is l, however, insufficient to attract new firms into the market.

41
Q

Abnormal profit (also known as supernormal profit and above normal profit)

A

Profit over and above normal profit.

42
Q

Technological change

A

A term used to describe the overall effect of invention, innovation and the diffusion or spread of technology in the economy.

43
Q

Invention

A

Making something entirely new; something that did not exist before at all.

44
Q

Innovation

A

Improves on or makes a significant contribution to something that has already been invented, thereby turning the results of invention into a product

45
Q

Productive efficiency

A

For the economy as a whole occurs when it is impossible to produce more of one good without producing less of another. For a firm it occurs when the average total cost of production is minimised.

46
Q

Dynamic efficiency

A

Measures improvements in productive efficiency that occur in the long run over time.

47
Q

Duopoly

A

Two firms only in a market

48
Q

Monopolistic competition

A

a market structure in which firms have many competitors, but each one sells a slightly different product.

49
Q

Creative destruction

A

Capitalism evolving and renewing itself over time through new technologies and innovations replacing older technologies and innovations.

A-Level Economics (9 decks)

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