4 Production Costs and Revenues Flashcards Preview

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Flashcards in 4 Production Costs and Revenues Deck (31):
1

How is productivity calculated?

By output per worker per period of time

2

What does being more productive mean?

The same input, such as the number of workers, produces more outputs over the same period of time

3

How come productivity be increased?

By training workers are using more advanced capital machinery

4

What does being more productive mean?

It lowers average costs per unit of output

5

Which Economist stated the concept of specialisation?

Adam Smith

6

In terms of the Adam Smith concept, what is specialisation and how can it be achieved?

Specialisation occurs when each worker complete a specific task in the production process. It's can be achieved through the division of labour when worker productivity can increase

7

What are advantages of specialisation?

Increased efficiency and lower average costs of production
Opportunity to create a greater variety of goods and services
More opportunities for economies of scale

8

Are some disadvantages of specialisation?

Work becomes repetitive which could lower the motivation of workers, there could be more structural unemployment, there could be higher worker turnover for firms as workers become dissatisfied with their jobs more regularly

9

What is the comparative advantage?

When a country can produce a good at lower opportunity cost to another

10

When does absolute advantage occur?

When a country can produce more of the good with the same fact inputs

11

What are some advantages of specialisation in the production of goods and services to trade?

Greater world output, so there is again in economic welfare
Lower average costs, since the market becomes more competitive
There is an increase supply of goods to choose from
There is an outward shift in the PPF curve

12

What are some disadvantages of specialisation in the production of goods and services to trade?

Less-developed countries might use up the nonrenewable resources to quickly, so they might run out.
Countries could become overdependent on the Xbox of one commodity, such as wheat. If there are poor weather conditions, or the price falls, then the economy would suffer

13

What are the functions of money?

A medium of exchange, a measure of value, a store of value, a method of deferred payment

14

What is the difference between short run and the long run?

In the short run there is at least one fixed cost whereas in the long run or costs are variable

15

What is the marginal return of a factor?

The extra output derived per extra units of factor employed

16

What is the average return of a factor?

The output per unit of output. This is output per worker over a period of time

17

What is the total return of the fact it?

The total output produced by number of units of factors over a period of time

18

When do you diminishing returns occur?

Only in the short run

19

What does the law of diminishing returns assume?

That firms have fixed the fact that resources in the short run and that the state of technology remains constant

20

What is returns to scale?

Returns to scale refers to the change in output of the firm after an increase in fact inputs.

21

When do returns to scale increase?

When the output increases by a greater proportion to the increase in inputs

22

What are decreasing returns to scale linked to?

This economies of scale since it occurs when the firm becomes less productive

23

What are constant returns to scale?

When output increases by the same amount that inputs increases by

24

When can there be fixed costs?

In the short run as at least one factor of production cannot change

25

When are all costs variable?

In the long run as a factor inputs can change

26

What are fixed costs?

Costs that do not vary with output. For example, rents, advertising and capital goods are fixed costs. They are in direct

27

What are variable costs?

They are direct costs that change with output. For example, the cost of raw materials increases as output increases

28

What is total cost?

The cost to produce a given level of output and it is calculated by: total costs = total variable costs + total fixed costs

29

What is average costs?

The cost per unit and is calculated by: total costs divided by quantity produced

30

What is the marginal cost of production?

The cost of producing one extra unit of output

31

Why is the short run average total cost curve U-shaped?

Due to the law of diminishing returns because the factors of production are fixed so at one point, employing more resources will be less productive, which means the marginal output decreases put extra factor of production. Marginal costs start to increase