2.3 Productive efficiency

Question 1

State and define the 4 main factors of production

Answer 1

• Land;
• Labour:
• Capital:
• Enterprise:

Question 2

What factors affect productivity?

Answer 2

• Motivation
• Quality of capital and labour
• Process and product innovation

Question 3

What is the difference between capital and labour-intensive production?

Question 4

What are the advantages of capital-intensive production?

Question 5

What are the disadvantages of capital-intensive production?

Question 6

What are the advantages of labour-intensive production?

Question 7

What are the disadvantages of labour-intensive production?

Question 8

Define capacity utilisation and where full and spare capacity occur

Answer 8

Capacity utilisation: The extent to which factors of production are fully employed
- Full capacity = 100% capacity utilisation
- Spare capacity = less than full capacity utilisation

Question 9

Define productivity and efficiency

Answer 9

• Productivity: Output per unit time
• Efficiency: Production at minimum average cost

Question 10

Outline 2 methods of improving capacity utilisation

Question 11

State and briefly explain 4 methods of production

Answer 11

• Job production:
• Batch production:
• Flow production:
• Cell production:

Question 12

Explain the link between productivity and competitiveness

Answer 12

When a firm reaches productive efficiency/MES, LRAS is at its lowest so firms can lower their prices and still cover costs. This gives that firm a competitive advantage.