| whats supernormal profit | when a firms total sales revenue exceed the total costs of production |
| what is production | the total output of goods and services produced by an individual firm or country |
| what is productivity | a measurements of the rate of production by one or more factors of production |
| equation for productivity | productivity = total output per period of time / number of units of factor of production |
| what is labour productivity | output per worker per unit of time |
| equation for labour productivity | labour productivity = total output per period of time / number of units of labour |
| what is specialisation | involves an individual worker, firm, region or country producing a limited range of goods or services |
| what is division of labour | specialisation at the level of an individual worker |
| what is exchange | where one thing is traded for something |
| what is short run | a period of time in which the availability of at least one factor of production is fixed |
| what is long run | a period of time over which all factors of the production can be varied |
| what are fixed costs | costs of production that do not vary with the level of output in the short put |
| what are variable costs | costs of production that vary with the level of output |
| average fixed costs equation | AFC = total fixed costs / output |
| average variable costs equation | AVC = total variable costs / output |
| total costs equation | TC = total fixed costs + total variable costs |
| average total cost equation (1) | average total cost = total costs / output |
| average total costs equation (2) | ATC = average fixed costs + average variable costs |
| what are total costs | the addition of fixed costs and variable costs at a given level of output |
| what are average total costs | total costs of production divided by the number of units of output |
| what is marginal costs | the adding to a firms total costs from making an additional unit of output |
| what is the law of diminishing returns | when additional units of variable factors of production are added to a fixed factor, marginal output or product will eventually decrease |
| what are returns to scale | the relationship between increasing the quantity of a firms input ad the proportional change in output |
| what is increasing returns to scale | where an increase in the quantity of a firm inputs leads to a proportionally greater change in output |
| what are constant returns to scale | where an increase in the quantity of a firms inputs leads to a proportionally identical change in output |
| decreasing returns to scale | where an increase in the quantity of a firms input leads to a proportionally lower change in output |
| what are financial economies of scale | the larger and more reputable a firm is, the more likely it is that banks and other lenders will deem its credit worthy and less risky recipient of loan funds |
| what are economies of scale | the reduced average total costs that firms experience by increasing output in the long run |
| what are internal economies of scale | a reduction in long run average total costs arising from growth of the firm. |
| what are technical economies of scale | larger business can generally afford the latest specialist capital equipment which is often v expensive |
| what are marketing economies of scale | larger firms are likely to have huge advertising budgets |
| managerial economies of scale | larger firms can afford to recruit the highest profile chief executive officers |
| external economies of scale | reductions in long run average total costs rising from the growth of the industry in which a firm operates |
| diseconomies of scale | increases in the avg total costs that firms may experience by increasing output in the long run |
| what is total revenue | the money a firm receives from selling its output |
| what is average revenue | total revenue divided by units of output. equal to price in a firm that sells one product at a fixed price |
| total revenue equation | total revenue = price x quantity |
| average revenue equation | total revenue / quantity |
| what is average revenue the same as? | price!!!!!!!!! |
| what is marginal revenue | the addition to a firms total revenue from selling an additional unit of output |
| equation for marginal revenue | change in total revenue / change in output |
| what is perfect competition | ideal type of market structure where all producers and consumers have full and symmetric information and no transaction costs. |
| perfect competition is characterised by? | 1. a large number of buyers and sellers
2. no firm is large enough to influence the market price -- each is a price taker
3. perfect knowledge of the market
4. no barriers to entry or to exit from the markets
5. each firm sells an identical product |
| what is a monopoly | a market structure that consists of a single seller or producer and no close substitutes. |
| total profit equation | total rev - total cost |
| whats normal profit | Normal profit is often viewed in conjunction with economic profit. |
| whats supernormal profit | when a firms total sales revenue exceed the total costs of production |
| monopoly diaram | 1 |
| second monopoly diagram | 2 |
| disadvantage of monopoly | inefficiencies, a lack of innovation, and higher prices |
| advantages of monopoly | Without competition, monopolies can set prices and keep pricing consistent and reliable for consumers. |
| monopoly formula | he monopoly price and quantity are found where marginal revenue equals marginal cost (MR = MC): PM and QM. |
| perfect competition | 3 |
