Production costs and revenues

• What is automation in production?

  Machines control other machines
• How is average cost calculated?

  Total production cost divided by total output
• What does average revenue represent?

  Total revenue divided by total output
• What is capital productivity?

  Output per unit of capital
• What are constant returns to scale?

  Output increases by equal proportion to inputs
• What are decreasing returns to scale?

  Output increases by a smaller proportion than inputs
• What are diseconomies of scale?

  Long-run average costs rise as output rises
• What is division of labour?

  Different workers perform different tasks
• What are economies of scale?

  It is cheaper to make a range of products
• What is economy of scale?

  Long-run average costs fall as output rises
• What is external economy of scale?

  Firm savings from industry growth
• What is a fixed cost?

  Costs that do not vary with output
• What are increasing returns to scale?

  Output increases by a larger proportion than inputs
• What is internal economy of scale?

  Firm savings from its own growth
• What is labour productivity?

  Output per worker
• What does the law of diminishing returns state?

  Returns fall by adding variable factors to fixed factors
• What is the long run in production?

  Time when all factors can be varied
• What is long-run average cost?

  Long-run total cost per unit of output
• What is long-run production?

  Changing the scale of all factors of production
• What is mechanisation?

  Transitioning to more capital intensive production
• What is minimum efficient scale (MES)?

  Lowest output level at which costs are minimized
• What is normal profit?

  Total revenue equals total costs
• What are operating costs?

  Same as variable costs
• What are overheads?

  Same as fixed costs
• What is output in production?

  Processes converting inputs into outputs
• What is productive efficiency?

  Minimum average total cost
• What does productivity measure?

  Output per unit of input
• How is profit calculated?

  Total revenue subtract total costs
• What is the rate of return?

  Income received from an investment
• What are returns to scale?

  Output changes as inputs are altered
• What is the definition of average cost?

  Total production cost divided by total output (cost per unit of output)
• What is the definition of average revenue?

  Total revenue divided by total output (revenue per unit of output)
• What is the definition of capital productivity?

  Output per unit of capital
• What is the definition of constant returns to scale?

  When output increases by an equal proportion the increase in inputs
• What is the definition of decreasing returns to scale?

  When output increases by a smaller proportion than the increase in inputs
• What is the definition of diseconomies of scale?

  When long-run average costs rise as output rises
• What is the definition of division of labour?

  Different workers performing different tasks in a good's/service's production, specialising to an extent
• What is the definition of economies of scale?

  When it is cheaper to make a range of products
• What is the definition of economy of scale?

  When long-run average costs fall as output rises
• What is the definition of external economy of scale?

  Firm savings resulting from growth of the industry a firm is part of