365446
Description
Flashcards by Saravanan Sonia, updated more than 1 year ago
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Created by Saravanan Sonia
about 11 years ago
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| Question | Answer |
| Profit Maximisation | process by which a firm determines the price and output level that gives the greatest profits |
| Horizontal merger | when firms in the same industry at the same stage in the production process merge |
| Vertical merger | when firms in the same industry at different stage in the production process merge |
| Conglomerate merger | when 2 firms in different industries merge |
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profit (image/jpg)
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the difference between the firm's total revenue received from the sale of output and its total costs paid to attract resources from their best alternative use |
| Total revenue (TR) | firm's total earnings from the sales of its product for a specific period of time |
| Average Revenue (AR) | revenue per unit of product sold |
| Marginal Revenue (MR) | additional revenue arising from the sale of an additional unit of output |
| short run | period of time over which at least 1 factor of production is fixed |
| long run | period of time long enough for all factors of production to be varied |
| fixed cost of production | costs that are incurred from the use of fixed factors of production |
| variable cost of production | costs that are incurred from the use of factors of production that are variable |
| average fixed cost (AFC) | fixed cost per unit of output |
| Total Fixed Cost (TFC) | costs that do not vary with outputs |
| Total Variable Cost (TVC) | costs that vary (+)ly with output |
| Average Variable Cost (AVC) | variable cost per unit of output |
| Total Costs of Production (TC) | sum of all costs incurred in producing any level of output (TFC & TFC) |
| Average Cost of Production (AC) | total cost per unit of output |
| Marginal Cost (MC) | additional cost arising from an additional output |
| Law of diminishing returns | as more and more units of a variable factor (e.g: Labour) are added to an unchanged amount of fixed factor (e.g: Land), the additional output produced by the additional variable factor will eventually decrease |
| Law of returns to scale | the returns from production when all the factors of production are increased or decreased simultaneously by the same proportion |
| increasing returns to the scale | where a given percentage increase in inputs will lead to a larger percentage increase in outputs |
| constant returns to the scale | where a given percentage increase in inputs will lead to the same percentage increase in outputs |
| decreasing returns to the scale | where a given percentage increase in inputs will lead to a smaller percentage increase in outputs |
| Economies of Scale (EOS) | experienced if unit cost falls as the output increases |
| Internal economies of Scale | fall in unit costs of production when the firm increases output by expanding its scale of production |
| external economies of scale | refers to the fall in unit costs of production experienced by the firm as a result of the industry growing from other firms in the industry expanding their scale of production |
| Diseconomies of Scale (DisEOS) | experienced if the unit cost increases as the output increases |
| internal diseconomies of scale | rise in unit costs of production when the firm increases output by expanding its scale of production |
| external diseconomies of scale | rise in unit costs of production experienced by the firm as a result of the industry growing from other firms in the industry expanding their scale of production |
| Technical Economy of Scale | reduction in unit costs when a firm expands its plant size |
| Non-technical Economy of Scale | other cost savings (not related to plant size) that the firm experiences |
| Implicit Cost | opportunity cost of using resources that are owned and do not involve a direct payment of money |
| implicit costs | actual costs of using resources that arise when a firm makes actual cash payments for the resources purchased in the factor market |
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