Unit 3 Flashcards
(43 cards)
What is production?
The conversion of factor inputs into output.
What are the different forms of productivity?
Labour Productivity
Capital Productivity
Factor Productivity
What is labour productivity?
Output per worker.
Total output/no of workers
What is capital productivity?
Output per unit of capital
What is factor productivity?
Output of all factors of production
When does short run production occur?
When a firm adds variable factors of production to fixed factors of production.
When does long run production occur?
When a firm changes the scale of all factors of production.
Whats the equation for productivity?
total output / units of fop
What is productive efficiency?
Where no additional output can be produced from the factor inputs available at the lowest possible average or unit cost
What’s the equation for Average Total Cost?
Total cost/output
How can productive efficiency be shown on a ACC?
At the MES (lowest point of curve) where ATC are at their minimum
How can we see when productive efficiency is created?
- Purchasing economies lead to a reduction in costs
- Specialisation can lead to a more efficient use of inputs
- Better management leads to an increased output with the same factor inputs.
What is specialisation?
When economic units concentrate on producing specific goods or services.
What is specialisation likely to cause?
An increased output per worker (productivity) as workers have a better understanding of their job
Why does specialisation lead to increased output?
- Greater understanding of the requirements of production
- Each economic unit can specialise in what they are best at
- Efficient use of time as there is no switching between tasks
- Technical economies of scale as capital equipment is used to produce goods and services
How did we use to exchange?
Barter
Benefits of specialisation and division of labour?
- Repetition of a limited range of activities can increase skill and aptitude, leading to a worker becoming an expert e.g. a neurosurgeon.
- Reduced time spent moving between different tasks or workstations means increased productivity.
- As tasks are broken up into smaller ones, it becomes efficient to use specialist machinery.
- DoL allows people to work to their natural strengths, example physical strength or ability to communicate.
What is allocative efficiency?
Where consumer satisfaction is maximised in the production of goods/services
What is economic efficiency?
Where there is allocative and productive efficiency at the same time
What are market forces?
Push prices towards equilibrium where quantity demanded equals quantity supplied
What is static efficiency?
When all resources are being used in the most efficient manner at a point in time
What influences dynamic efficiency?
Research and development
Investment in human and capital
What is the profit maximising rule?
MR = MC
What is the objective of firms?
Profit maximisation
