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Flashcards in Production Etc Deck (16)
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1
Q

Specialisation

A

People or countries producing a limited range of goods or services that they are usually best or most efficient at

2
Q

Division of labour

A

Specialisation at the level of an individual worker

Adam Smith 1776

3
Q

Exchange

A

Where one thing is traded for something else

4
Q

What does specialisation and div of labour require, and why?

A

System of exchange in order to obtain the products no longer make themselves
Preferably, an efficient system of exchange, such as money

5
Q

Specialisation Ads

A

Natural strengths
Repetition leads to experience e.g neurosurgeon
Improves labour productivity - better quality and higher quantity
Reduction in time lost transfering tasks
Eos e.g production line
Improves efficiency - tackles scarcity, more output per unit input
Reduces training costs

6
Q

Specialisation Dis

A

Repetition is boring
Reduction in self sufficiency… risk of disruption in trade leads to loss in supplier
Reduction in flexibility - non transferable skills lead to structural unemployment UK coal mining

7
Q

Law of Diminishing Returns

A

When additional units of variable factors of production are added to a fixed factor, marginal output of product eventually decrease

8
Q

Returns to scale

A

The relationship between increase in the quantity of a firm’s inputs and the proportional change in output

9
Q

Increasing returns to scale
Constant returns to scale
Decreasing returns to scale

A

Where an increase in quantity of firms input leads to proportionally greater change in output
Where an increase in quantity of firms input leads to proportionally identical change in output
Where an increase in quantity of firms input leads to proportionally lower change in output

10
Q

Economies of scale

A

The reduced average total cost that firms experience by increasing output in the long run

11
Q

Six eos

A

Technical - production line, speculated equipment, labour specialisation, law of increased dimensions e.g taller roof, volume
Purchasing - negotiate discounts on bulk, important customers drive hard bargain
Managerial - employ specialists leading to better decisions, less managers etc reducing costs
Financial - lower interest rate due to loe risk
Risk bearing - diversification leading to easy prediction of overall demand, absorb failures
Marketing - adverts usually fixed spread ovr more units reducing unit cost, advertising multiple products on one flyer, brand awareness

12
Q

External Eos examples

A

Local collages offer qualifications
Local infrastructure developments
Economies of agglomeration - poach skilled / trained workers, resource sharing, transport cost reductions

13
Q

Internal Dos

A

Wastage and loss increases
Communication difficulties
Control + coordination difficulties
‘them and us’

14
Q

External dos - as industry size rises…

A

Cost of raw materials may rise

Local suppliers may not supply bulk, further afield suppliers may be more expensive

15
Q

Large economies scale

A

Reduced average total costs from high set up costs such as robot assembly line which may reduce labour variable costs - smaller firms forced to follow or out

16
Q

Minimum Efficient Scale

A

Lowest level of output at which average total costs of production are minimised
Significant barrier to entry and good argument in favour of large dominant firms
Varies vastly between industries