Efficiency and Productivity
Output produced relative to the inputs used in production.
What is productivity?
A market with many sellers offering an identical product.
What is perfect competition?
The money received by a firm from selling its output.
What is total revenue?
The ability of a firm to influence price or output.
What is market power?
Land, labour, capital and enterprise collectively.
What are the factors of production?
Producing goods and services at the lowest feasible cost without wasting resources.
What is productive efficiency?
A market with many sellers offering similar but differentiated products.
What is monopolistic competition?
Total revenue minus total cost.
What is profit?
An obstacle that makes entering a market difficult or costly.
What is a barrier to entry?
Concentrating production on a narrow range of tasks or products.
What is specialisation?
Resources move away from DVDs and towards streaming services as consumer preferences change.
What is allocative efficiency?
Qantas considers how Virgin Australia will respond before changing its airfares.
What is interdependence?
The cost associated with producing the next unit of output.
What is marginal cost?
A firm must accept this, determined by overall market supply and demand.
What is a price taker?
A larger factory allows machinery and workers to be used more efficiently, reducing average costs.
What are internal economies of scale?
A factory uses all its resources without waste, but produces a product consumers no longer want in large quantities. It has achieved the first form of efficiency but not the second.
What are productive efficiency and allocative inefficiency?
Numerous cafés offer differentiated products, have some control over price and face relatively low barriers to entry.
What is monopolistic competition?
A firm should continue increasing output while the revenue from the next unit exceeds the cost of producing it. This condition identifies the point at which it should stop expanding output.
What is the profit-maximising output?
or
What is MC = MR
Dominant firms closely monitor and frequently match each other’s prices and technological changes.
What is Interdependence?
This measure compares output with the combined contribution of labour, capital and other inputs.
What is multifactor productivity?
A firm regularly develops improved products and production methods, but poor management means that it still wastes resources. It has achieved the first form of efficiency but not the second.
What are dynamic efficiency and productive inefficiency?
Large fixed costs and falling average costs mean one electricity network can supply the entire market more cheaply than several competing networks.
What is a natural monopoly?
A firm lowers its price to sell another unit, but the lower price must also be charged on units it could already sell. The additional income created by the decision is measured by this concept.
What is marginal revenue?
Strong barriers prevent competitors entering, allowing an established firm to continue earning profit above the minimum required to remain in the market.
What is supernormal profit?
Average costs fall for several firms because growth of the entire industry attracts specialist suppliers and skilled workers to the region.
What are external economies of scale?