1.2.3 Business costs, revenues and profit

Define and use formulae to calculate total revenue, total costs, total fixed costs, total variable costs, average total costs and profit.

Define economies of scale and internal economies of scale; explain purchasing, marketing, technical, financial, managerial and risk-bearing internal economies. Define external economies of scale and explain skilled labour, infrastructure, access to suppliers and clusters of similar businesses.

Define diseconomies of scale and explain bureaucracy, communication problems, lack of control and distance between senior management and workers. Use an LRAC diagram to show internal economies, diseconomies and the output at which the business is most efficient.