3.1-3.6

Output
the number of goods or services produced by a firm
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Fixed costs
costs that do not vary with output e.g. rent
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Variable costs
costs that vary directly with output e.g. raw materials
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Total revenue
the amount a firm receives from selling its product. Total rev = price x quantity sold
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Average revenue
Total revenue divided by the output. Average rev = total rev/output
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Profit
the total amount of money a firm makes after it has paid all its costs. Profit = total revenue - total costs
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Production
the process of combining scarce resources to make an output
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Productivity
output per worker per period of time
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Specialisation
When individuals, firms or countries produce a limited range of goods or services.
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Merger
agreed coming together of two firms
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Takeover
when one firm seeks to take control of another (this can be either friendly or hostile).
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Integration
this occurs when two firms come together through either a merger or a takeover
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Internal growth
generated through increasing sales
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External growth
achieved through a merger or a takeover. This is when one firms joins together with another.
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Internal economies of scale
when one firm grows in size (increases output) and so benefits from lower average costs (lower costs per unit).
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External economies of scale
when a whole industry grows in size, so a firm within that industry benefits from lower average costs.
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Risk-bearing
as a firm grows larger, it is able to spread the risk over a larger number of outlets/factories/products
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Financial
as a firm grows larger, it is able to obtain cheaper sources of finance. Banks are more willing to lend money to larger firms at a lower rate because they are more likely to repay it back.
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Marketing
larger firms will find it more cost-effective to advertise nationally
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Technical
as a firm grows larger, it will be able to invest in machinery that can increase productivity and therefore lower the average costs of production
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Managerial
as a firm grows larger, it is able to employ specialist managers, such as finance managers to help make the workers more efficient
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Purchasing
as a firm grows larger, it will be able to take advantage of price reductions from suppliers, as it can buy in bulk.
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Economies of scale
As a firm grows larger in size (increases the number of products it produces/output), the long-run average costs fall
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Diseconomies of scale
These occur when a firm grows too large and average costs start to rise
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Wage
A wage is an individual payment, usually for a week's work. It tends to be given as an amount per hour
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Salary
A salary is an individual payment, usually for a month's work. It tends to be given as an amount per year (12 parts).
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Gross income
The amount a person receives before all deductions are taken into account such as taxes, NI, pensions, student loans etc
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Nominal income
The income paid to labour, unadjusted for the effects of inflation
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Real income
The income paid to labour, adjusted for the effects of inflation.
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National minimum wage
a pay floor introduced by the government, which sets a wage level below which producers cannot legally go.
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Other cards in this set

Card 2

Front

Fixed costs

Back

costs that do not vary with output e.g. rent

Card 3

Front

Variable costs

Back

Preview of the front of card 3

Card 4

Front

Total revenue

Back

Preview of the front of card 4

Card 5

Front

Average revenue

Back

Preview of the front of card 5
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