Production costs and revenue

What is automation?

Automatic control; the process by which machines control other machines

What is average cost?

Total production cost/total output (cost per unit of output)

What is average revenue?

Total revenue/total output (revenue per unit of output)

What is capital productivity?

Output per unit of capital

What is constant returns to scale?

When output increases by an equal proportion the increase in input

What is decreasing returns to scale?

When output increase by a smaller proportion than the increase in inputs

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 goods/services production, specialising to an extent

What are economies of scope?

When is it cheaper to make a range of products

What is an economy of scale?

When long-run average costs fall as output rises

What is an external economy of scale?

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

What is fixed cost?

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

What are increasing returns to scale?

When output increases by a larger proportion than the increase in inputs

What is an internal economy of scale?

Firms saving resulting from growth of the firm itself

What is labout productivity?

Output per worker

What is the law of diminishing returns?

By continually adding variables factors atop fixed factors, eventually both average and marginal returns to the fixed factor fall

What is the long run?

Time period in which non of the factors of production are fixed, and all can be varied

What is long-run average cost?

Long-run total cost per unit of output

What is long-run production?

When a firm changes the scale of all factors of production

What is mechanisation?

When a firm transfers from becoming more labour intensive to becoming more capital intensive

What is minimum efficient scale (MES)?

The lowest level of output at which average costs are minimised. Dependent on the market structure as well as barriers to entry

What is normal profit?

Total revenue = total costs; the minimum profit required to keep a firm operating in an industry

What are operating costs?

Same as variable costs

What are overheads?

Same as fixed costs

What is production?

A set of processes that convers input into outputs

What is productive efficiency?

Minimised average total cost

What is productivity?

Output per unit of input

What is profit?

Total revenue - total costs

What is rate of return?

Income received from an investment

What are returns to scale?

The scale by which a firm’s output changes as the scale of all inputs are altered

What is the short run?

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

What is specialisation?

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

What is a sunk cost?

Non-recoverable costs of entering a market

What is supernormal (abnormal) profit?

Any level of profit over and above normal profit

What is a technical economy of scale?

Cost saving through changing the production process

What is total cost?

Total fixed cost added to total variable cost