Production, costs and revenue
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課程筆記
Costs
- Within a stated period and capacity range, fixed totals do not vary with output while variable totals do. Classify the payment arrangement: fixed salary and piece-rate pay are different; energy may include standing and usage charges. Loan interest is a cost, but loan principal repayment reduces debt rather than being a production expense.
- TC = FC + total VC. For positive output, AC = TC/Q, AFC = FC/Q and AVC = total VC/Q, so AC = AFC + AVC. Marginal cost is the extra total cost of one additional unit. With unchanged FC, more output spreads it over more units; this alone does not establish a long-run scale economy.
Classify the stated payment
Revenue and profit
- For a single uniform selling price, TR = price × quantity sold and AR = TR/quantity sold. For mixed prices, add actual sales revenue. Production can differ from sales because inventories change. Profit = TR − TC on the stated period and cost basis, with a loss if negative and break-even if zero.
- In the fictional monthly model TC = 1,000 + 5Q and TR = 10Q, assuming all output is sold. At 200 units both are £2,000. At 400 units TR £4,000 less TC £3,000 gives £1,000 profit. Constant price, unit variable cost and capacity assumptions matter; profit is not necessarily net cash flow.
Fictional monthly break-even
Economies and diseconomies of scale
- Economies of scale lower long-run average cost as scale expands. Purchasing discounts, technical efficiency and specialist management can help; finance terms depend on assessed risk. Risk-bearing economies can involve spreading exposure across products or markets, though diversification itself has costs. External economies arise from industry growth, such as shared specialist suppliers.
- Diseconomies can arise through coordination, communication or motivation problems that increase long-run unit cost. A bigger machine or firm is not automatically more efficient. Distinguish these scale effects from using spare capacity and spreading fixed cost in an unchanged plant.
Scale effects need a mechanism
Productivity and efficiency
- Production is the activity of creating goods or services; output measures the amount produced. Productivity relates output to a specified input over a period. Workshop output rises 400 to 450 units, but hours rise 100 to 150, so output per labour hour falls 4 to 3, a 25% decrease.
- Training, technology and better organisation may reduce waste or increase acceptable output per input. Check quality and other input costs: higher labour productivity alone does not prove total cost falls or workers benefit equally. Skills, downtime and capacity affect results.
Output and productivity differ
Technology and costs
- Automation may reduce labour input or material waste but can add equipment, finance, maintenance, energy and training costs. Evaluate reliability, quality and demand as well as unit costs. Physical capital investment is spending to add or improve productive assets, not the same transaction as buying a financial share.
- Fictional monthly existing process: FC £1,000, unit VC £5. Automated process: FC £1,600, unit VC £3. At Q400 costs are £3,000 and £2,800, saving £200; at Q200 costs are £2,000 and £2,200, making automation £200 dearer. The total-cost crossover is Q300; no automatic profit or cash benefit follows.
Automation depends on output
Example
- Fictional Q200: FC £1,000 and unit VC £5 give variable total £1,000 and TC £2,000. AFC £5 plus AVC £5 gives AC £10. At price £10, AR is £10 and TR £2,000, so profit is zero.
- At Q400 with the same conditions, total VC £2,000, TC £3,000 and AC £7.50. AFC falls to £2.50 while AVC stays £5. TR £4,000 gives £1,000 profit. Using the same plant more fully is not, by itself, evidence of a long-run economy of scale.
Fictional monthly cost and revenue
Objectives and wider effects
- Firms can pursue survival, profit, sales growth or market share, with trade-offs over time. A price rise can reduce quantity sold, so it does not guarantee higher revenue or profit. Check both revenues and costs.
- Private cost-saving can impose costs on others or reduce quality, while higher spending can protect safety and reliability. Explain effects on workers, consumers and the environment as well as owners, and distinguish measured profit from available cash.
Judge more than one outcome
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練習題
免費預覽——35 題中的 8 題。註冊即可查看全部。
1.What are fixed costs?
Easy- Acosts unchanged by output within a stated period and capacity range
- Bcosts that change with output
- Crevenue
- Dprofit
2.What are variable costs?
Easy- Acosts that stay the same
- Brevenue
- Cprofit
- Dcosts that change with output
3.What is total cost?
Easy- Aprice multiplied by quantity sold
- Bonly total fixed cost
- Ctotal fixed cost plus total variable cost
- Dtotal revenue plus profit
4.When every unit sells at the same price, how is total sales revenue calculated?
Easy- Atax
- Bprice multiplied by quantity sold
- Ccosts
- Dprofit
5.What is profit?
Easy- Arevenue minus total costs
- Bcosts minus revenue
- Crevenue only
- Dtax
6.A firm sells 100 items at £8 each. What is its revenue?
Easy- A£108
- B£92
- C£80
- D£800
7.TC is £600 and revenue is £900. What is profit?
Easy- A£600
- B£900
- C£300
- D£1,500
8.TC is £900 and revenue is £600. What is the result?
Easy- A£1,500 profit
- Ba £300 loss
- Ca £300 profit
- Dbreak-even
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