Production Costs and Revenue Flashcards
(36 cards)
What is production ?
Production is a process where inputs , such as factors of production is converted into a final output
Define productivity
Output per unit input per time
Define specialisation
Specialisation is when each region completes a specific task in large production processes.
What is the pros of specialisation ?
- Higher output and thereby quality increases
- Greater Variety of goods
- Increased chance of EOS
- Lower Average Costs ( more competition and lower prices)
What are the cons of specialisation ?
- Work can be repetitive and lose motivation
- Structural Unemployment
- Lack of Variety
- Occupational Immobility
What is comparative advantage ?
Comparative advantage us when a firm can produce a good at a lower opportunity costs to another
What is absolute advantage ?
Absolute advantage is when a country can produce more with the same factor inputs
What are the functions of money?
Money acts like a store of value, measure of value , standard of deffered payment and a medium of exchange.
Define Short run
In the short run , at least on factor of production cannot change, so there is at least one fixed costs
Define Long-Run
Long run is when all the factor inputs can change , so all costs are variable
What is the marginal return of factor?
The marginal return of a factor is the extra output derived per extra unit of the factor employed
What is average returns ?
Average return is the output per unit of input
What is total return ?
Total return is the total output produces by a no of units of factors over period of time
Define the law of diminishing returns
This is when the variable factor of production is added to a fixed factor of production , eventually the marginal and then the average returns.
What is the returns to scale?
The rate by which output changes if scale of all factors of production is changed
What is marginal cost?
Marginal costs = change in total cost / change in total output
What is average costs ?
Average costs is the cost per unit
Why is the marginal cost curve shaped ?
- Marginal costs curve is shaped as it is because initially average costs fall when input increases , but they rise.
Why is the LRTAC curve u shaped ?
Economies and diseconomies of scale
Define economies of scale ?
This is when the average costs of production fall as output increases.
What is internal economies of scale ?
Internal economies of scale is when firms becomes larger (RFMTMP)
What are the different internal economies of scale ( Really Fun Mums Making Pies ) ?
Risk bearing , Financial, Managerial, Technological, Marketing, Purchasing
What is an external economies of scale ?
External occurs when an entire industry grows : firms can benefit from transport lines, R&D and better education.
What happens in decisions of scale ?
This when the output exceeds a certain point (CCC): control , coordination and communication
