4.1.4 production, costs and revenue Flashcards
(51 cards)
define production
The conversion of inputs/ factors of production into outputs in the production process
define productivity
output per unit of input employed in a given period of time
Define labour productivity
output per unit worker per hour/given period of time
state reasons for improved labour productivity
- increased specialisation and division of labour
- increased education and training
- increased investment in human capital
- improvements in performance in related pay - acts as incentive
what is productivity a measure of?
efficiency
define productivity gap
Difference in productivity levels between different countries
when is an economy productively efficient
when it can produce more of one good by producing less of another good
if all inputs/ factors of production are fully utilised to its maximum potential
give two impacts of improved productivity
output increases - economies of scale exploited
average costs falls
define specialisation
workers performing a narrow range of tasks
define division of labour
the production process broken down into smaller tasks
workers are assigned to particular tasks
what is money
Medium of exchange
how does specialisation benefit firms
specialisation increases productivity - this means lower costs of production therefore profit increases
how does specialisation benefit consumers
specialisation means lower opportunity cost of production therefore consumers buy increased quantity of goods and services at a lower price
explain the impact of a lower average cost as a result of increased specialisation
Increased supply
drawbacks of specialisation
- monotony
- higher wages for workers
- increased cost of production
- technical unemployment
- chances of overspecialsation
- lack of a flexible workforce
- countries become less self sufficient
- firms only specialise in one good or service
Negative impacts of specialisation on supply
excess supply
prices would have to be lowered to clear this supply
profits therefore decrease as a result
Define short run production
One FOP fixed- at least one fixed cost
all other FOP’s are variable - variable costs can change
The scale of production fixed
Maximum output produced due to fixed fop
define long run production
all costs and fops are variable
therefore scale of production variable
what is the only way the firm can increase output in the short run
Increasing labour
barter system
system of exchange in which goods or services are traded directly for other goods or services without the use of money
economic efficiency
when both productive and allocative efficiency are present - scarce resources being used in most efficient way from a consumer’s standpoint
Total Cost (TC)
The total expense incurred by a firm in producing and marketing a product.
Average Cost (AC)
cost per unit of output
Marginal Cost (MC)
the change in total costs associated with a one-unit change in output
