Costs, Revenue, Profit etc Flashcards
What is average product?
The output per unit of the variable factor
What is marginal product?
The extra output gained from employing an extra unit of the variable factor
How do you differentiate from short run and long run costs revenue and profit?
The short run is the period of time when at least ONE factor of production is fixed.
In the long run, ALL factors of production are variable
What are costs of production?
The expenses a business faces when producing goods or supplying services
What are fixed costs & some examples of them for a business?
Fixed costs do not change with output.
Examples include, rent, salaries or insurance.
What are variable costs & some examples of them for a business?
How is total variable costs (TVC) calculated?
Variable costs change proportionately with output. (The can be known as direct costs)
Examples include materials for products and piece rate labour costs.
TVC = variable cost per unit X number of units
How is total costs (TC) and average total costs (ATC) calculated?
TC = fixed costs + variable costs ATC = total costs / quantity producted
What are average fixed costs (AFC) and average variable costs (AVC)?
AFC is the average fixed cost of producing a unit.
AFC = FC / quantity produced
AVC is the average variable cost of producing a unit.
AVC = TVC / quantity produced
What is marginal costs (MC)?
Is the additional cost of producing one extra unit of output.
What is total revenue?
The business’ total income from selling goods / services
What is marginal revenue?
This is the additional revenue gained from selling one extra unit of output.
What is profit and profit maximisation?
Profit is the difference between total revenue and total cost.
Profit maximisation means setting output at the level at profits are as large as possible. This is where the difference between TR and TC is at its greatest.