4.1.4 - Production, Costs and Revenue Flashcards

Question

Why is the average fixed cost curve the way it is

Answer 1

As its costs do not change with output, as output grows the cost is spread so the AFC curve decreases with increased output

Answer 2

There becomes a point where variable costs reach the point of the law of diminishing return and the AVC starts to rise to be able to i crease output , due to increased wages and raw materials for example

Answer 3

Is determined by the average variable cost curve and average fixed cost curve. It is influenced more by the AVC as it becomes a greater cost than the AFC

Answer 4

When the MC curve rises due to the law of diminishing return it causes the ATC and the AVC to rise as well as they are averages, an extra unit which is bigger than the average will cause the average to rise as well

Answer 5

Increases through the individual costs of fixed costs or variable costs Increase in capital price leads to increase average fixed costs and therefore leads to increased average total costs Increased wages leads to increased average variable costs and therefore increased average total costs and marginal costs

Answer 6

Is the money a firm receives from selling its output

Answer 7

Total revenue = price x quantity

Answer 8

= Total revenue / quantity Average revenue = price

Answer 9

The addition to a firms total revenue from selling an additional unit of output

Answer 10

= change in total revenue / change in output

Answer 11

A Economies of scale Higher productivity Higher quality products D Specialised firms are not flexible Workers may become bored (lack of motivation)

Answer 12

Marginal revenue decreases when output is increased. There are smaller increases in revenue at each level of output

Answer 13

When marginal revenue = 0 Total revenue is maximised Total revenue continues to increase until marginal revenue is less than 0, because then they would be losing revenue.

Answer 14

Is a situation where a firm makes enough profit to reward the entrepreneur for taking the risk and is to remain competitive. It implies zero economic profit An example is that the owner could have made a salary of £50,000 in a normal job, therefore the entrepreneur needs to make £50,000 salary, included as a cost for the business

Answer 15

Normal profit is when total revenue = total costs Occurs at an output where AR=AC

Answer 16

Is profit above normal profit. A firm is making supernormal profit if they have excess profits of what they need to remain competitive.

Answer 17

Is the relationship between increasing the firms inputs and the change it has on output

Answer 18

Is when a firms outputs have a greater change than its inputs Decrease in AC

Answer 19

When a firms outputs are identical to its inputs AC stays the same

Answer 20

When a firms outputs are less than the change in inputs AC increase

Answer 21

Is the reduced average total costs that firms experience by increasing its output in the long run

Answer 22

Economies of scale cause decreased AC and therefore increasing returns to scale Diseconomies of scale increase the AC causing decreasing returns to scale

Answer 23

The lowest level of output at which average costs are minimised

Answer 24

Are reductions in long run average costs arising from growth of the firm

Answer 25

Financial economies of scale : large firms are more likely to be offered cheaper loans wit low interest rates , reducing costs Bulk buying- large firms buy in larger quantities, reducing the average cost Technical economies of scale- large firms will invest in new technology as its cost effective Marketing economies of scale- large firms have big advertising budgets which are spread out due to large output Managerial economies of scale - large firms can use division of labour to achieve high productivity, reducing costs

Answer 26

Are reductions in long run average costs arising from the growth of the industry it operates in E.g. better transport infrastructure , supplier moving closer

Answer 27

When a firm has an increase in its average costs by increasing output in the long run

Answer 28

3c’s and a M Control - large businesses can lose control, less productivity Communication - hard to communicate in large firms , time is wasted and there is less productivity Coordination - hard to work together between departments in large firms Motivation - lots of workers makes the individual worker feel less valued, less productivity

Answer 29

It is the joining of all the minimum points of the Short run average costs as they represent the possible points of production over time

Answer 30

Is the creation of a product or process

Answer 31

Is where products and production processes are developed into marketable goods or services

Answer 32

Can reduce firms long run costs Can make markets more competitive

Answer 33

Is where technological change leads to development of new disruptive products which change existing products

4.1.4 - Production, Costs and Revenue Flashcards

(57 cards)