Production Costs Revenue and Profit Definitions

Converts inputs or factor services into outputs of goods and services.

Occurs when a firm adds variable factors of production to fixed factors of production.

Occurs when a firm changes the scale of all the factors of production.

Output per unit of input.

Out per worker.

Output per unit of capital.

The difference between labour productivity in the UK and in other developed economies.

A worker only performing one task or a narrow range of tasks, also, different firms specialising in producing different goods or services.

This concept goes hand in hand with specialisation. Different workers perform different tasks in the course of producing a good or service.

The buying and selling of goods and services.

To give something in return for something else received. Money is a medium of exchange or means of payment.

The time period in which at least one factor of production is fixed and cannot be varied.

The time period in which no factors of production are fixed and all can be varied.

Costs of production which, in the short run, don’t change with output.

Costs of production which change with levels of output, even in the short-run.

Fixed cost + variable cost at a particular level of production.

Total cost of production divided by output.

Long-run total cost divided by output.

As output increases, long-run average costs fall.

As output increases, long-run average costs rise.

A cost saving generated through changes to the ‘productive process’ as the scale of production and the level of output increases.

Cost saving resulting from the growth of the firm itself

Cost saving resulting from the growth of the market or industry of which the form is a part

All the money received by a firm from selling its total output.

Total revenue divided by output.

The difference between total sales revenue and total costs of production.