You can find it on the demand and supply graph. The area until equilibrium.
Average revenue: total revenue/ quantity = price
Marginal revenue: additional revenue from the next item sold
When demand is price inelastic, you can raise prices and total revenue will not decrease.
When demand is price elastic, firms can raise prices but total revenue will fall.
Total cost: total fixed cost +total variable cost
Total fixed cost: costs that do not vary with output e.g. rent
Total variable cost: costs that do vary with output e.g. ingredients
Average (total) cost: total cost divided by output
Average fixed cost: fixed cost divided by output
Average variable cost: variable cost divided by output
Marginal cost: the extra cost of producing one extra unit.
Diminishing marginal productivity: when you hire more workers, each worker slows down because they are sharing the same fixed factors e.g. 5 chefs in the same kitchen.
Short-run: when there is at least one fixed factor of production.
Long-run: when all factors are variable.
Average cost curve: U-shaped
Marginal cost curve: tick shaped
Average revenue: downward sloping (demand curve)
Marginal revenue: twice as steep as the AR curve.
Economies of scale: when long-run average costs fall as output increases.
Really Fun Mums Try Making Pies
Risk (new recipe)
Financial (access to finance)
Marketing (every little helps)
Technical (self checkouts)
Managerial (easier to delegate work)
Purchasing (bulk-buying)
Diseconomies of scale: when long run average costs rise as output increases.
coordination (difficult to manage the staff)
control (difficult to identify weak spot)
communication (workers feel alienated)
Economies and Diseconomies of Scale
Minimum efficient scale: the minimum level when a firm can first start to exploit maximum economies of scale.
Internal economies of scale: affect one firm.
External economies of scale: affect the entire industry.
