topic 4 production costs and revenue

Question 1

productivity is calculated by

Answer 1

output per worker per period of time

Question 2

being more productive means

Answer 2

same input but more output

Question 3

being less productive means

Answer 3

larger input but same quantity of output

Question 4

specialisation occurs

Answer 4

when each worker completes a specific task in a production process

Question 5

advantages of specialisation of labour

Answer 5

-higher output and potentially higher quality since production focuses what people and business are best at
-could be greater variety of goods and services produced
-more opportunities for economies of scale
-more competition so incentive to keep prices low

Question 6

disadvantages of specialisation of labour

Answer 6

-work becomes repetitive and lower motivation and could affect quality and productivity
-structural unemployment since skills might not be transferable
-higher worker turn over
- decrease variety

Question 7

comparative adavantage

Answer 7

a country can produce something at a lower opportunity cost than another country

Question 8

absolute advantage

Answer 8

when a country can produce more of a good with the same factor input

Question 9

advantages of specialisation in production of goods and services to trade

Answer 9

-greater world output
-lower average costs - competitive
-increased supply of goods
-outward shift in the PPF curve

Question 10

disadvantages of specialisation in production of goods and services to trade

Answer 10

-less developed countries might use up non renewable sources too quickly
-countries could become over dependent on the export of one commodity

Question 11

function of money

Answer 11

-a medium of exchange
- a measure of value
-a store of value
- a method of deferred payment

Question 12

in the short run can production be changed

Answer 12

no, its fixed

Question 13

in the long run can production be changed

Answer 13

yes its flexible

Question 14

the marginal return of a factor

Answer 14

extra output derived per extra unit of factor employed

Question 15

the average return of factor

Answer 15

the output per input of input

Question 16

the total return of a factor

Answer 16

the total output produced by a number of units of factors over a period of time

Question 17

the law of diminishing returns states that

Answer 17

when a business adds more of a variable factor while keeping other factors the same the extra output from each new worker gets smaller after a certain point

Question 18

when does the law of diminishing returns only occur in

Answer 18

short run

Question 19

returns to scale

Answer 19

the change in output of a firm after an increase in factor inputs

Question 20

constant returns to scale

Answer 20

when output increases by the same amount that input increases by

Question 21

increasing returns to scale

Answer 21

when output increases by a greater proportion to the increase in inputs

Question 22

decreasing returns to scale

Answer 22

when output increases by a lower proportion to the increase in inputs. linked to diseconomies of scale when firms get less productive

Question 23

in the short run at least one of the _____________ cannot change

Answer 23

factors of production (so there are some fixed costs)

Question 24

in the long run all factor inputs can

Answer 24

change so all costs are variable

Question 25

fixed cots are costs that

Answer 25

do not vary with output

Question 26

are fixed costs direct or indirect

Answer 26

indirect

Question 27

variable costs change with

Answer 27

output

Question 28

are variable costs direct or indirect

Answer 28

direct

Question 29

total costs are calculated by

Answer 29

total costs = total variable costs + total fixed costs

Question 30

average costs are calculated by

Answer 30

average costs = total costs / quantity produced

Question 31

total cost is

Answer 31

the cost to produce a given level of output

Question 32

average cost is

Answer 32

the cost per unit

Question 33

marginal cost of production is

Answer 33

the cost of producing one extra unit of output

Question 34

why is the short run average cost curve U shaped

Answer 34

due to diminishing returns

Question 35

internal economies of scale occur when

Answer 35

when aa firm becomes larger average costs of production fall as output increases

Question 36

examples of internal economies of scale

Answer 36

-risk bearing -financial -managerial -technological -marketing -purchasing

Question 37

risk bearing- internal economies of scale

Answer 37

when a firm becomes larger they can expand their production range so can spread the cost of uncertainty ,if one part is not successful they have others to fall back on

Question 38

financial- internal economies of scale

Answer 38

banks are willing to lend loans more cheaply to larger firms

Question 39

managerial- internal economies of scale

Answer 39

larger firms are able to specialise and divide their labour. they can employ specialist managers and supervisors which lower average costs

Question 40

technological - internal economies of scale

Answer 40

larger firms can afford to invest in more advanced and productive machinery and capital

Question 41

marketing - internal economies of scale

Answer 41

larger firms can divide their marketing budgets across larger outputs so the average cost of advertising per unit is less than a smaller firm

Question 42

purchasing - internal economies of scale

Answer 42

larger firms can bulk buy

Question 43

network economies of scale happen when

Answer 43

when a business benefits from having more users or customers This phenomenon arises because the value of a product or service increases as more people use it.

Question 44

external economies of scale occur when

Answer 44

occur when an entire industry benefits from cost reductions due to factors outside of individual firms

Question 45

diseconomies of scale occur when

Answer 45

output passes a certain point and average costs start to increase per extra unit of output produced

Question 46

examples of diseconomies of scale

Answer 46

-control -coordination -communication

Question 47

the AR (average return) curve is the same as the

Answer 47

demand curve because average revenue curve is the price of the good

Question 48

average revuenue is the

Answer 48

average price per unit

Question 49

average revuenue is calculated by

Answer 49

tr / quantity

Question 50

in markets where firms are price takers where businesses cannot set their own prices and must accept the price set by the market the AR curve is

Answer 50

horizontal

Question 51

profit is the difference between

Answer 51

total revenue and total costs

Question 52

when demand is perfectly elastic marginal revenue equals

Answer 52

average revenue

Question 53

marginal revenue measures

Answer 53

the change in total revenue with respect to changes in the amount of goods and services sold

Question 54

marginal revenue is calculated by

Answer 54

change in total revenue/ change in quantity sold