Productivity Costs, Revenue And Profits Flashcards
(27 cards)
What did Adam smith do ?
The division of labour- developed specialisation
What is division of labour
Dividing the production process into different stages enabling workers on focus on specific tasks
What is specialisation
When workers are assigned specific tasks within a production process and increases labour productivity and efficiency
What is the barter system
Trading good for good or service for service
What is fixed resources
Doesn’t change as you produce more
What are variable resources
Does change as you produce more
What is short run
Has at least one fixed resources, can’t specialise and divide
What is long run
Potential in the future, ideas economy’s of scale, where all factors of reduction are variable
What is average costs (AC)
Unit costs of product= total costs/ the number of units of a good produced
What is marginal costs (MC)
The costs of producing one additive unit of a good = change in total production costs/ change in quantity produced
What does the ac curve look like
A U shaped
What is the equation for total costs
Total fixed costs + total variable costs
What are constant returns to scale
An increase in input results in in a proportional increase in output
What are increasing returns to scale
The output increases in a greater proportion than the increase input
What are decreasing returns to scale
The output increases by less than proportional amount of increases in input
What are economies of scale
The costs advantages that enterprises obtain die to their scale of operation, where unit costs fall as output rises
Give me an example of an econom of scale
- technical economies- when a firm can produce goods/services more efficiently as it increases its scale of production
-managerial economies - lager firms may benefit from having specialised management teams
- marketing economies - larger firms have more resources to allocate to marketing advertising
-financial economies - larger firms may have access to financing options
-risk bearing economies - larger firms may be better equipped to handle unexpected market fluctuations
What are external economies of scale
Where the LRAC of a firms falls following a growth in the market or industry of which the firms is a part
What are diseconomies of scale
Happens when a company or business grows so large that the cost per unit increases, an increase in LRAC
What is revenue (TR)
The total amount of money received from any level of given output
What is average (AR)
The average receipt per unit sold
What is an imperfect market
When firms have some ability to set prices because there are different between the products of individual businesses within that market
What is a perfectly competitive market
Where firms are forced to are the market price because all products are homogenous so if they tried their price consumers would just switch to the other competitiors
What is normal profit
The minimum level of profit required to keep factors of production in their current use in the long run
