Y1 Production, costs and revenue

Question 1

Short run

Answer 1

At least one FoP fixed (size of kitchen)

Question 2

Long run

Answer 2

All FoP are variable

Question 3

Pros and cons of specialisation

Answer 3

Pros: Lower avg cost
Better quality
More productivity

Cons: May be a small or
temporary market
Inflexible
Interdependence

Question 4

Economies of scale

Answer 4

Falling avg cost as output increases

Question 5

How is internal EoS achieved

Answer 5

Tony’s Mother Found My Rabbit
Technical/production
Marketing/purchasing
Financial
Managerial
Risk-bearing

Question 6

External economies of scale

Answer 6

Cost advantages received by a firm as a result of external factors

Question 7

Diseconomy of scale

Answer 7

Avg cost rises as output increases

Question 8

How does a DEoS happen

Answer 8

Lack of:
Control
Communication
Coordination
Co-operation

Question 9

Growth clusters

Answer 9

When firms locate near eachother to receive benefits from external EoS

Question 10

Labour productivity

Answer 10

Output per worker per hour

Question 11

Capital intensity

Answer 11

Percent of investment in fixed capital, results in higher labour productivity

Question 12

Capital deepening

Answer 12

Increasing the proportion of capital to labour