Costs Flashcards
(23 cards)
What’s rent
a sum of money payed on a regular basis or the use of something, typically payed to a landlord for a property.
Wages are
a fixed payment earned by your service to a job payed on a daily or weekly basis.
What’s interest
an extra amount on top of what you owe
Profit
the money gained through a business once its broke even
Value added is?
value added is therefore the difference between the market price paid for a product by a consumer and the cost of the natural And man made materials, components and resources to make it
What’s Productivity ?
this is how much output can be produced per unit of input in a certain amount of time. It is a measure of efficiency
What’s specialisation
this is when a firm specialises in a certain thing they are good at eg banks focus on financial issues.
Division of labour is where?
each worker specialises in a certain area which helps speed up the production process.
Short run
at least one of your factors of production is fixed and cannot be expanded
Long run is?
all the factors of production can be varied
Fixed costs
costs that do not change due to the level of output. Such as rent and salaries
Variable costs are ?
costs that vary depending on the level of output. Like raw materials
What are total costs?
the cost of variable costs and fixed costs
Average fixed costs are?
fixed costs divided by output
What are average variable costs?
variable costs divided by level of output
What are average total costs?
total costs divided by the output
Optimum output
where the firm is most efficient is the minimum point on the average total cost curve. You should note that this is not where the firm maximises profit.
Total revenue?
the total amount of sales before wages and production costs and all. To calculate the Total Revenue (TR) you simply multiply the number sold by price.
Average revenue
this will be the same as the price.revenue divided by output.
Break even point
where the total costs is equal to total revenue. Where no money is lost or gained. When profits are at 0.
Economies of scale
Economies of scale are the cost savings a business makes as it gets bigger eg
Using specialist staff
Borrowing money cheaper
Getting discounts from suppliers because of bulk orders
Having own transport to move products around
What are diseconomies of scale?
Diseconomies of scale are when costs rise because of the size of the business eg
Communications are bad because the business is so big
Difficult to get people together to make decisions
What is marginal costs
The cost of producing one extra unit of goods or service
