Costs and Revenues

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  • Costs and revenues
    • Short run and long run
      • Short run - at least one fixed factor of production
      • Long run - all factors of production are variable
    • Costs
      • Fixed costs - do not change with output
        • Only in SR
      • Variable costs - do change with output
        • SR and LR
      • Average costs
        • Average fixed costs (AFC) - Fixed costs/Output
        • Average variable costs - Variable costs/Output
        • Marginal costs - change inTC/change in Output
    • Efficiency
      • Productive efficiency - lowest point on AC curve
      • Allocative efficiency - P=MC
    • Economies and diseconomies of scale
      • Economies of scale
        • Internal
          • Financial economies
          • Risk-bearing economies
          • Technical economies
          • Managerial economies
          • Marketing economies
          • Purchasing economies
        • External
          • Innovation
          • New transport links
          • SME share administrative and secretarial facilities
      • Diseconom-ies of scale
        • Firm grows too large
        • Moves beyond MES
        • Breakdown of communication
        • Breakdown of control
        • Culture clash
        • Lose cooperation and motivation
    • Revenues
      • Total revenue - TR=PxQ
      • Average revenue - TR/Q
      • Marginal revenue - Change in TR/Change in Q

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