Business objectives (OCR A-Level Economics): Flashcards
📚Flashcards
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15 cards from this deck
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Practise the cards
15 cards from this deck
Fixed Costs
Fixed Costs
Costs that do not change with output level
Variable Costs
Variable Costs
Costs that vary directly with output level
Total Costs
Total Costs
Sum of fixed and variable costs
Average Costs
Average Costs
Total costs divided by quantity of output
Marginal Costs
Marginal Costs
Additional cost of producing one more unit
Short Run (production factors)
Short Run (production factors)
Period where at least one factor of production is fixed
Long Run (production factors)
Long Run (production factors)
Period where all factors of production are variable
Law of Diminishing Returns
Law of Diminishing Returns
Adding variable factor to fixed factor eventually causes marginal product to decrease
Internal Economies of Scale
Internal Economies of Scale
Cost advantages from firm increasing production scale, lowering average costs
External Economies of Scale
External Economies of Scale
Cost advantages as industry grows, benefiting all firms
Diseconomies of Scale
Diseconomies of Scale
Average costs increase as production scale becomes too large
Minimum Efficient Scale (MES)
Minimum Efficient Scale (MES)
Lowest output level achieving lowest possible average costs
Financial Economies (internal)
Financial Economies (internal)
Larger firms have access to cheaper finance
Purchasing Economies (internal)
Purchasing Economies (internal)
Large firms buy raw materials in bulk at discounted rates
Who benefits from external economies of scale?
Who benefits from external economies of scale?
All firms within an industry