Microeconomics definitions - production and productivity

• Production


  A measure of the value of the output of goods and services
• Productivity 


  A measure of the efficiency of the factors of production
• Specialisation 


  When we concentrate on a product or task
• Division of labour 


  When production is broken down into many separate tasks
• Fixed costs 


  Costs that do not change as the level of output varies
• Variable costs 


  Costs that vary directly to the production or sale of a product
• Marginal costs 


  Change in the total cost from a business producing one extra unit
• Internal economies of scale 


  Occur from the expansion of the firm itself or efficiencies from a larger scale of production
• External economies of sales 


  Involves changes outside the business
• Agglomeration 


  Businesses in a similar industry cluster together and attract an influx of skilled talent
• Total revenue 


  All the money received by a firm from selling its total output
• Average revenue 


  Total revenue divided by output
• Marginal revenue 


  Addition to the total revenue resulting from the sale of one more unit of product
• Profit 


  The difference between total sales revenue and total costs of production
• Normal profit 


  The minimum profit a firm must make to stay in business
• Supernormal profit 


  Profit which is over and above the normal profit