macroeconomics chapter 3 Flashcards
short run production
At least one factor of production is fixed but the firm adds variable factors of production
firms are only able to influence price through changes to the production process.
long run production
where all factors of production are variable
in the long run firms are able to adjust all costs
productivity
output per unit of input (efficiency)
labour productivity
output per worker
capital productivity
output per unit of capital
productivity gap
the difference in labour productivity I uk and other countries
specialisation
a worker only performing one or a narrow range of tasks
can also mean firms specialising in producing different goods
division of labour
different workers perform different tasks in the course of producing a good or service.
trade
the buying and selling of goods and services
exchange
to give something in exchange for something else
short run
the time period in which at least factor of production is fixed and cannot be varied
long run
all factors can be made variable
fixed costs
cost that does not change with output
variable cost
cost changes with output
average costs
total cost divided by output
economies of scale
as output increases long run average cost falls
diseconomies of scale
as output increases long run average costs rises
types of internal economies of scale (changes within a firm)
technical purchasing managerial financial risk bearing
technical economies of scale
production lines- can be used to make a lot at low costs
large firms may be able to buy specialised equipment which reduces average cost
workers can specialise which may not be possible in small firms
purchasing economies of scale
buying in bulk
financial economies of scale
borrow money at lower interest rate if your a larger company
risk bearing economies of scale
large firms less exposed to risk as they can risks can be spread by diversifying output
managerial economies of scale
will be able to employ specialised managers leading to better decisions being made.
examples of diseconomies of scale
managerial ( may have to make people lower in the business managers leading to bad decisions)
communication failure
motivational
