Production, costs and revenue

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  • Created by: JMunners
  • Created on: 04-04-17 12:14
a productive organisation which sells its output of goods or services commercially
firm
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the change in the quantity of total output resulting from the employment of one more worker, holding all the other factors of production fixed
marginal returns of labour
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a short-term law which states that as a variable factor of production is added to a fixed factor of production, eventually both the marginal and average returns to the variable factor will begin to fall
law of diminishing returns
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total output divided by the total number of workers employed
average returns of labour
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total output produced by all the workers employed by a firm
total returns of labour
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output per unit of output
productivity
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output per worker
labour productivity
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the rate by which output changes if the scale of all factors of production is changed
returns to scale
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an establishment, such as a factory, a workshop or a retail outlet, owned and operated by a firm
plant
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when the scale of all the factors of production employed increases, output increases at a faster rate
increasing returns to scale
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when the scale of all the factors of production employed increases, output increases at the same rate
constant returns to scale
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when the scale of all the factors of production employed increases, output increases at a slower rate
decreasing returns to scale
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as output increases, long-run average cost falls
economy of scale
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as output increases, long-run average cost rises
diseconomy of scale
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cost per unit of output incurred when all factors of production or inputs can be varied
long-run average cost
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the size of firm capable of producing at the lowest average cost and thus being productively efficient
optimum firm size
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the lowest output at which the firm is able to produce at the minimum achievable LRAC
minimum efficient scale
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changes in long-run average costs of production resulting from changes in the size or scale of a firm or plant
internal economies and diseconomies of scale
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a fall in long-run average costs of production resulting from the growth of the market or industry of which the firm is a part
external economy of scale
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an increase in long-run average costs of production resulting from the growth of the market or industry of which the firm is a part
external diseconomy of scale
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addition to total cost resulting from producing one additional unit of output
marginal cost
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total cost of employing the fixed factors of production to produce a particular level of output, divided by the size of output AFC = TFC/Q
average fixed cost
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total cost of employing the variable factors of [roduction to produce a particular level of output, divided by the size of output AVC=TVC/Q
average variable cost
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total cost of producing a particular level of output, divided by the size of output ATC=AFC+AVC
average total cost
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additional to total cost resulting from producing one additional unit of output when all the factors of production are variable
long-run marginal cost
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total cost of producing a particular level of output divided by the size of output when all the factors of production are variable
long-run average cost
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all the money receive by firms from selling its total output
total revenue
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total revenue divided by ouput
average revenue
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addition to total revenue resulting from the sale of one more unit of the product
marginal revenue
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a firm which is so small that it had to accept the ruling market price
price taker
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when a firm faces a downward sloping demand curve for its product, it possesses the market power to set the price at which it sells the product
price maker
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when a firm faces a downward sloping demand curve for its product, it possesses the market power to set the quantity of the good it wishes to sell
quantity setter
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the difference between total sales revenue and total cost of production
profit
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occurs at the level of output at which total profit is greatest
profit maximisation
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the minimum profit a firm must make to stay in business which is insufficient to attract new firms into the market
normal profit
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profit over and above normal profit also known as supernormal _
abnormal profit
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a term that is used to describe the overall effect of invention, innovation and the spread of technology in the economy
technological change
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making something entirely new that did not exist before
invention
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improves on or makes a significant contribution to something that has already been invented
innovation
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process of moving from a labour-intensive to a more capital-intensive method of production
mechanisation
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automatic control where machine operate other machines
automation
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the level of output at which average costs of production are minimised
productive efficiency
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occurs in the long run, leading to the development of new products and more efficient processes that improve productive efficiency
dynamic efficiency
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a market structure in which firms have many competitors, but each one sells a slightly differentiated product
monopolistic competition
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two firms only in a market
duopoly
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capitalism evolving and renewing itself over time through new technologies and innovations replacing older technologies and innovations
creative destruction
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Other cards in this set

Card 2

Front

the change in the quantity of total output resulting from the employment of one more worker, holding all the other factors of production fixed

Back

marginal returns of labour

Card 3

Front

a short-term law which states that as a variable factor of production is added to a fixed factor of production, eventually both the marginal and average returns to the variable factor will begin to fall

Back

Preview of the front of card 3

Card 4

Front

total output divided by the total number of workers employed

Back

Preview of the front of card 4

Card 5

Front

total output produced by all the workers employed by a firm

Back

Preview of the front of card 5
View more cards

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