 Form
4 Economics Note on Chapter 10 |
| Form
4 Economics Note on Chapter 10 |
distinguish between
fixed factor and variable factor
Distinguish between short run and
long run
Calculate average and marginal product
State the Law of Diminishing Marginal Returns
Distinguish between fixed cost and cariable cost
Calculate the average and marginal cost
State the advantages of large
scale production - a decrease in average cost due to the economies of scale
State the disadvantage of large
scale production - an increase in average cost due to the diseconomies of scale
Technical
Economics
According to the principle of
indivisibility, it can make full use of the machinery by expanding the scale of
production. So its average cost will be lower.
As output is expanded according to the principle of multiples, AC will
be lower because all machines will be used efficiently.
The construction cost depends heavily on the surface area but the
carrying capacity depends on volume. When the surface area increases, volume and so the
carrying capacity increases proportionately more. Hence the average cost of carrying a
larger capacity of goods will be lower.
Firms will keep reserve
capacity for maintenance. With a larger fleet, it need to keep more reserves, but the
increase in reserve is proportionately less and the average cost of keeping reserve
capacity is lower for a larger firm.
