Production, Costs and Revenue

What this unit covers

The resources follow the theory of the firm. Short run and long run come first: in the short run at least one factor of production is fixed, and in the long run all factors are variable. From there the material moves to productivity, specialisation and division of labour, costs of production, and average, total and marginal revenue.

Where to start

Begin with the mind map Production, costs and revenue. It gives you the whole outline in one view, from production and productivity to economies and diseconomies of scale. Then open Chapter 1 - The theory of production for the short run, the long run and the law of diminishing returns.

If you prefer definitions, the flashcard deck Part 1.2: Production, costs and revenue covers terms such as marginal returns of labour, average returns of labour, productivity and returns to scale.

Scale, objectives and revenue

Next, look at size. The mind maps Economies and Diseconomies of Scale and Economies of Scale explain how average total cost falls or rises as output grows. They also separate internal from external economies, and list managerial, technical, financial, marketing and purchasing types.

Then turn to what firms are trying to do. Revenue and Profit Maximisation is a set of notes that ties revenue maximisation to price elasticity and price discrimination across market segments. There is also a mind map on the benefits of price discrimination to a large business and its consumers.

Using quizzes with maps

1. Read one map and write down the key terms from memory.
2. Take a quiz such as Producers in the Short Run or Producers in the Long Run.
3. Return to the map for any question you missed.
4. Try a calculation quiz, like the one asking for Diane's economic profit from implicit and explicit costs.

Where it sits

This unit belongs to the strand Firms, Industries and Factor Markets in Economics. Choose a map or a quiz and start there, then add your own flashcards for the terms you find slippery.