Firms costs and revenues Flashcards
(31 cards)
What is the equation for profit ?
Revenue - costs
What is the equation for revenue ?
Value of sales - price of outputs sold
What is the definition of short-run ?
The period of time in which some factors of production are fixed
What is the definition of long run ?
A period of time in which all factors can be varied (time to change everything)
What is the production function ?
a functional relationship between the output of goods or services produced and the inputs used in the production process
What is the short run subject to ?
The law of diminishing marginal returns
What is the law of diminishing marginal returns ?
For example, as you employ more labour there will become a point that the marginal product of labour begins to decrease
When does task specialisation occur ?
This occurs as you employ more labour, the opportunity to specialise in tasks arises which increases the output of products even more
How to work out the average product of labour ? (APL)
Total output produced divided bu
the number of workers employed
What is the marginal product of labour ?
This is the change in total output produced as a result of employing one more worker
Equation for the marginal product of labour ?
Change in total product of labour divided by the employing one more worker
What are variable costs ?
These are costs which vary with quantity ofn output produced
What are fixed costs ?
Costs which do not vary with the quantity of output produced
What is the equation for a forms total costs ?
Total fixed costs plus total variable costs
What is the equation for the average cost ?
Total cost divided by quantity
Equation for average fixed costs ?
Total fixed costs divided by
quantity
Equation for average variable costs ?
Total variable costs divided by quantity
What is the scale of production ?
firms output equals inputs
What happens when a firm increases it’s factor inputs?
- increasing returns to scale (a percentage increase in inputs, larger increase in output )
- Constant returns to scale (a percentage increase in inputs, measn the same increase in outputs
- Decreasing returns to scale ( an increase in inputs results in a smaller increase in output)
What is economies of scale ?
Occurs when the average cost per unit of output falls as the scale of production increases
What is diseconomies of scale ?
Occurs when the average cost per unit of output increases as the scale of production increases
What are the two main issues of managing a bigger business ?
- Coordination and control - inefficiency and costs
2. Motivational - absenteeism, labour turnover and costs
Why is letting staff go a bad idea ?
- Bad impact on those let gp (morale)
- Bad omage among customers
- Brand reputation quality decreases due to higher costs
What is a price taker ?
A firm that has to take the market price of its product sa given
