4- Production costs and revenues.

Automation

Automatice control; the process by which machines control other machines.

Average cost

Total production cost divided by total output.

Average revenue

Total revenue divided by total output.

Capital productivity.

Output per unit of capital.

Constant returns to scale

When output increases by an equal proportion to the increase in inputs.

Decreasing returns to scale

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

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.

Economies of scope

When it is cheaper to make a range of products.

Economy of scale

When long-run average cost fall as output rises.

External economy of scale

Firms saving resulting from frowth of the industry a firm is part of.

Fixed cost

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

Increasing returns to scale

When ouput increases by a larger proportion than the increase in inputs.

Internal economy of scale

Firms saving resulting from growth of the firm itself.

Labour productivity

Output per worker

Law of diminishing returns

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

Long run

The time period in which none of that 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.

Mechanisation

When a firm transfers from becoming more laour intensive to becoming more capital intensive.

Minimum efficiency scale (MES)

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

Normal profit

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

Operating costs

Same as variable costs.

Overheads

Same as fixed costs.

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.

Rate of return

Income received from an investment.

Returns to scale

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

Short run

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

Specialisation

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

Sunk cost

Non-recoverable costs of entering a market.

Supernormal (abnormal) profit

Any level of profit over and above normal profit.

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.

X-inefficiency

When a firm lacks the incentive to control costs. This causes the average cost of production to be higher than necessary.