1.2.1

• fixed costs


  costs that do not vary directly with the level of output. Examples of fixed costs include: rent and business rates, the depreciation in the value of capital equipment (plant and machinery) due to age and marketing and advertising costs
• total fixed costs 


  the total amount of money a business must pay to keep their operations running regardless of how many products they make or sell
• average fixed costs 


  the fixed cost that does not change with the change in the number of goods and services produced by a company
• variable costs 


  variable costs vary directly with output i.e. as production rises, a firm will face higher total variable costs include costs of raw materials, labour costs and consumables.
• average variable 


  is the cost of all variable expenses involved in creating a product
• costs 


  costs faced by a business when producing a good or service for a market
• total variable costs 


  the sum of all variable costs associated with each individual product you've developed
• semi-variable costs 


  a cost composed of a mixture of both fixed and variable components
• total cost 


  total cost = total fixed costs +total variable costs
• average total cost 


  the sum total of all production costs divided by the total quantity of output
• economics of scale 


  benefits in the form of lower unit costs from increasing the size of operation
• diseconomies of scale 


  disadvantages to the firm in the form of higher long-run unit costs, from increasing their size of operation
• internal economies of scale

  measures a company's efficiency of production that efficiency is attained as the company improves output when the average cost per product drops
• external economies of scale

  business enhancing factors that occur outside the company but within the same industry
• products 


  the process of combing various inputs in order to create an output
• productivity 


  how much output can be produced with a given set of inputs.
• division of labour 


  the separation of a work process into a number of tasks with each task performed by a separate person or group of people.
• specialisation 


  the process where in a company or individual decides to focus their Labour on a specific type of production.
• short run 


  an economic concept that states that within a certain period in the future at least one input is fixed while others are variable.
• long run


  a concept in which all markets are in equilibrium and all prices and quantities have fully adjusted and are in equilibrium
• marginal product 


  the additional output created as a result of additional input placed into the company.
• increasing marginal returns 


  adding more of one factor of production while holding all others constant may under certain condition lead to an increase in the output per unit of the variable factor
• diminishing marginal returns 


  adding and additional factor of production results in smaller increases in output
• total output/product 


  the sum of the values of the final output and as the sum values added at each stage of the process
• average output 


  total output divided by a particular input
• optimum output 


  a businesses profit is maximised when it produces a quantity of output where the marginal revenue equals the marginal cost