MICRO - Specialisation & Cost Curves Flashcards
(25 cards)
Define specialisation in economics?
When economic agents focus on producing a specific good or task to increase efficiency.
What is the division of labour?
Breaking down production into separate, specialized tasks to boost productivity.
What is the link between specialisation and economies of scale?
Specialisation allows for firms to lower average costs by improving productivity and reducing unit costs
Define productive efficiency?
When production uses the minimum resources to create maximum output at the lowest cost.
What is a production process?
the conversion of factor inputs (land, labour, capital, enterprise)
What is allocative efficiency?
When resources are distributed optimally to match consumer preferences.
Define pareto efficiency?
a state where no one can be made better off without making someone worse off.
What is labour productivity?
Output per worker, measuring efficiency in production.
Define capital efficiency?
the amount of output produced per unit of capital used.
What does the short run mean in economics?
A period where atleast one factor of production is fixed.
what is the law of diminishing returns?
Adding more of a variable factor to a fixed factor will eventually lower marginal output.
What is marginal cost (MC) ?
The extra cost of producing one more unit.
formula: MC = TCn- TCn-1
What does long run mean in economics?
A period where all factors of production are variable.
Define total cost (TC):
The sum of fixed and variable costs at ant level of output.
What are fixed costs(FC):
Costs that do not change with output (rent, insurance).
What are variable costs (VC) ?
Costs that change directly with output.
What is average variable cost (AVC) :
The variable cost per unit produced.
Formula : AVC = VC/Q
Define average total cost (ATC) :
The cost per unit produced.
Formula : ATC = TC/Q
What is average fixed cost (AFC) :
The fixed cost per unit produced.
Formula : AFC = FC/Q
What are semi-fixed costs?
Costs that change with output but not directly (energy costs).
Explain economies of scale:
As output rises, average costs fall due to increased efficiency.
What is a cost curve?
A graph showing the relationship between costs and output.
Define marginal product (MP) :
The extra output produced when adding one more worker or unit of input.
What is the relationship between MP and MC?
As marginal product rises, marginal cost falls - until diminishing returns in.
