1.3 Production Costs and Revenues

What is the formula for Average Cost?

Total production cost divided by total output.

What does Average Revenue represent?

Total revenue divided by total output.

Define Capital Productivity.

Output per unit of capital.

What are Diseconomies of Scale?

When long-run average costs rise as output rises.

What is Division of Labour?

Different workers performing different tasks in a production process, specializing to an extent.

What is meant by Economy of Scale?

When long-run average costs fall as output rises.

Define External Economy of Scale.

Firms savings resulting from growth of the industry a firm is part of.

What are Fixed Costs?

Costs of production that do not vary with output, only in the short run.

Define Internal Economy of Scale.

Firms savings resulting from growth of the firm itself.

What is Labour Productivity?

Output per worker.

What is meant by Long Run in economics?

Time period in which none of the factors of production are fixed, and all can be varied.

Define Long-run Average Cost.

Long-run total cost per unit of output.

What occurs during Long-run Production?

A firm changes the scale of all factors of production.

Define Production.

A set of processes that converts inputs into outputs.

What is Productive Efficiency?

Minimized average total cost.

Define Productivity.

Output per unit of input.

How is Profit calculated?

Total revenue subtract total costs.

What is the Short Run in economics?

Time period in which at least one of the factors of production are fixed and cannot be varied.

Define Specialisation.

A worker only performing a specific task or a small range of tasks.

What is Technical Economy of Scale?

Cost saving through changing the production process.

How do you calculate Total Cost?

Total fixed cost added to total variable cost.

Define Total Revenue.

Price of each good, multiplied by quantity sold.

What are Variable Costs?

Costs incurred when paying for the variable factors of production.