3.3 Revenues, Costs and Profits Flashcards
(15 cards)
What is Total Revenue (TR)?
The total amount of money coming into the business through the sale of goods and services. Quantity x Price .
What is Average Revenue (AR)?
Demand is equal to AR: total revenue / output .
What is Marginal Revenue (MR)?
The extra revenue that the firm earns from selling one more unit of production: change in total revenue / change in output .
What is the formula for Total Costs (TC)?
Fixed Costs + Variable Costs
What is the formula for Average Total Cost (ATC)?
Total Costs / Output
What is the formula for Average Fixed Cost (AFC)?
Total Fixed Cost / Output
What is the formula for Average Variable Cost (AVC)?
Total Variable Cost / Output
What is the formula for Marginal Cost (MC)?
change in Total Cost / change in Output
What is the Short Run?
When at least one factor of production is fixed and cannot be changed.
What is the Long Run?
When all factors of production become variable.
What is Diminishing Marginal Productivity?
Diminishing Marginal Productivity means that if a variable factor is increased when another factor is fixed, there will come a point when each extra unit of the variable factor will produce less extra output than the previous unit.
What are Economies of Scale?
Economies of Scale are the cost advantages that firms obtain due to their scale of operation, and are typically measured by the amount of output produced per unit of cost (production cost).
What are the some types of Economies of Scale
- Technical Economies of Scale
- Financial Economies of Scale
- Risk Bearing Economies of Scale
- Managerial Economies
- Marketing and Purchasing Economies of Scale
What are Diseconomies of Scale?
Diseconomies of scale occur when an additional production unit of output increases marginal costs, which results in reduced profitability.
What is the Shut Down point?
AVC > AR
