Definitions I need to know

Saravanan Sonia
Flashcards by Saravanan Sonia, updated more than 1 year ago
Saravanan Sonia
Created by Saravanan Sonia almost 7 years ago
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Secondary 3 Economics Flashcards on Definitions I need to know, created by Saravanan Sonia on 11/17/2013.
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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
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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