Technology and Costs Flashcards

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In production, what does “technology” mean?

The use of new machines, software, and methods to make goods or services.

How can new technology affect fixed costs?

It often raises fixed costs at first, due to buying equipment and training.

How can technology change variable costs?

It can cut variable costs per unit by using less labour, materials, or energy.

If technology raises productivity, what happens to average cost per unit?

It usually falls, because fixed costs are spread over more units.

Why might costs rise in the short run when a firm adds new technology?

The firm must pay to buy and set up the tech and train staff. Output may dip during change.

What is automation and how does it affect labour costs?

Automation is using machines to do tasks. It tends to cut labour cost per unit.

What is process innovation and how can it lower costs?

It is a new way to produce a product. It can speed up work and reduce waste, so unit costs fall.

How can digital stock control systems reduce costs?

They track stock in real time, so the firm holds less stock and wastes less. Storage costs fall.

How can technology reduce the cost of defects and returns?

Sensors and software check quality during production. Faults are found early, so there is less scrap and fewer returns.

How can new technology change the cost of making one more unit?

It can lower the extra cost of making one more unit by using fewer inputs.

What does ‘capital-intensive’ mean, and how can technology shift a firm towards it?

Capital-intensive means using more machines than labour. New tech can raise fixed costs and cut labour cost per unit.

How can maintenance and downtime affect cost savings from new technology?

Breakdowns and maintenance add costs and can stop output. This can delay or reduce savings.

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