Micro Year Topic 3 Definitions - Production Costs and Revenue

Average cost

Total production cost divided by total output (cost per unit of output)

Average revenue

Total revenue divided by total output (revenue per unit of output)

Capital productivity

Output per unit of capital

Diseconomies of scale

When long run average costs rise as output rises

Division of labour

Different workers performing different tasks in a good's/services' production specialising to an extent

Economy of scale

When long run average costs fall as output rises

External economy of scale

Firms saving resulting from growth of the industry a firm is part of

Fixed cost

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

Internal economy of scale

Firms saving resulting from growth of the firm itself

Labour productivity

Output per worker

Long run

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

Long run average cost

Long run total cost per unit of output

Long run production

When a firm changes the scale of all factors of production

Production

A set of processes that converts inputs into outputs

Productive efficiency

Minimised average total cost

Productivity

Output per unit of input

Profit

Total revenue subtract total costs

Short run

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

Specialisation

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

Technical economy of scale

Cost saving through changing the production process

Total cost

Total fixed cost added to total variable cost

Total revenue

Price of each good multiplied by quantity sold

Variable cost

Costs incurred when paying for the variable factors of production