Economics 3.3 revision

What is a fixed cost?
Fixed costs are those that do not vary with output e.g. rent, loan repayments, salaries
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What is a variable cost?
Variable costs increase as output increases e.g. raw materials, wages
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What is an imputed cost?
An economic cost which a firm does not pay for with money to another firm but is the opportunity cost of factors of production which the firm itself owns
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Give 4 examples of imputed costs?
Labour/ capital/ depreciation/ goodwill
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What is marginal revenue?
The addition of total revenue of an extra unit sold.
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How do you calculate marginal revenue?
change in total revenue/ change in total output
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What is marginal cost?
The cost of producing an extra unit of output
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How do you calcualte marginal cost?
change in total cost/ change in total output
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What is the law of diminishing marginal product?
As equal quantities of one variable factor are increased, while other factor inputs remain constant, a point is reached beyond which the addition of one more unit of the variable factor will result in adiminishing rate of return and the MPP will fall
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What is the marginal physical product (MPP)?
It is the change in output resulting from employing one more unit of a particular input.
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What are the 5 sources of economies of scale?
Technical/ Managerial/ Marketing/ Purchasing/ Financial
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What is economies of scale?
A fall in long run average costs of production as output rises.
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What is diseconomies of scale?
A rise in long run costs of production as output rises.
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What is external economies of scale?
A growth in the size of the industry in which the firm operates.
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What is abnormal profit?
The profit over and above normal profit
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What is normal profit?
The profit that the firm could make by using its resources in their nect best use.
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Other cards in this set

Card 2

Front

What is a variable cost?

Back

Variable costs increase as output increases e.g. raw materials, wages

Card 3

Front

What is an imputed cost?

Back

Preview of the front of card 3

Card 4

Front

Give 4 examples of imputed costs?

Back

Preview of the front of card 4

Card 5

Front

What is marginal revenue?

Back

Preview of the front of card 5
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