Questions and Answers
What is the formula for Average Fixed Cost?
What is Average Variable Cost?
TVC ÷ Qs
How is Average Total Cost calculated?
AVC + AFC
What is the formula for Average Product?
Signup and view all the answers
What does Marginal Cost represent?
Signup and view all the answers
How is Marginal Product calculated?
Signup and view all the answers
What is the formula for Total Cost?
Signup and view all the answers
How is Total Revenue calculated?
Signup and view all the answers
What does Total Product equal?
Signup and view all the answers
How is Average Revenue calculated?
Signup and view all the answers
What is the formula for Marginal Revenue?
Signup and view all the answers
What does XED (Cross-price Elasticity) represent?
Signup and view all the answers
What does YED (Income Elasticity) measure?
Signup and view all the answers
How is PED (Elasticity of Demand) calculated?
Signup and view all the answers
What identifies the Break Even Point?
Signup and view all the answers
What defines Productively Efficient?
Signup and view all the answers
What does Allocatively Efficient mean?
Signup and view all the answers
How is profit maximized?
Signup and view all the answers
What defines the point to Maximise Revenue?
Signup and view all the answers
What indicates the Socially Optimal Point?
Signup and view all the answers
How is Marginal Revenue Product calculated for perfect competition?
Signup and view all the answers
What does Marginal Factor/Resource Cost represent?
Signup and view all the answers
Study Notes
Average Fixed Cost (AFC)
- Calculated by dividing Total Fixed Cost (TFC) by Quantity Supplied (Qs).
- Can also be found by subtracting Average Variable Cost (AVC) from Average Total Cost (ATC).
Average Variable Cost (AVC)
- Determined by dividing Total Variable Cost (TVC) by Quantity Supplied (Qs).
- Can be calculated by subtracting Average Fixed Cost (AFC) from Average Total Cost (ATC).
Average Total Cost (ATC)
- Sum of Average Variable Cost (AVC) and Average Fixed Cost (AFC).
Average Product (AP)
- Computed as Total Product (TP) divided by the number of units of labor employed.
Marginal Cost (MC)
- Represents the change in Total Cost (TC) when quantity supplied (Qs) increases by one unit.
Marginal Product (MP)
- Calculated as the change in Total Product (TP) divided by the change in labor.
Total Cost (TC)
- The sum of Total Fixed Cost (TFC) and Total Variable Cost (TVC).
Total Revenue (TR)
- Calculated by multiplying price (P) by Quantity Supplied (Qs).
Total Product (TP)
- The difference between Total Revenue (TR) and Total Cost (TC), indicating net production output.
Average Revenue (AR)
- Found by dividing Total Revenue (TR) by Quantity Supplied (Qs).
Marginal Revenue (MR)
- Represents the change in Total Revenue (TR) when the quantity supplied (Qs) is increased by one unit.
Cross-price Elasticity of Demand (XED)
- Calculated using the percentage change in quantity demanded of good 1 (QD of G₁) over the percentage change in price of good 2 (P of G₂).
- A negative value indicates goods are complementary, while a positive value indicates they are substitutes.
Income Elasticity of Demand (YED)
- Calculated using the percentage change in quantity demanded (QD) over the percentage change in income (Y).
- A negative value classifies goods as inferior, and a positive value classifies them as normal.
Price Elasticity of Demand (PED)
- Computed as the percentage change in quantity demanded (QD) divided by the percentage change in price (P).
Break Even Point
- Identified where Average Total Cost (ATC) intersects with demand (D).
Productive Efficiency
- Achieved when a firm operates at the lowest Average Total Cost (ATC).
Allocative Efficiency
- Occurs when price (P) equals marginal cost (MC), indicating optimal distribution of resources.
Profit Maximization
- Achieved at the point where Marginal Cost (MC) equals Marginal Revenue (MR).
Revenue Maximization
- Occurs when Marginal Revenue (MR) equals zero, indicating no additional revenue from selling more output.
Socially Optimal Point
- Achieved when Marginal Cost (MC) equals demand (D), maximizing societal welfare.
Marginal Revenue Product (MRP)
- The change in revenue associated with hiring one additional worker is calculated as Marginal Product (MP) multiplied by price (P) for perfect competition, or MP multiplied by Marginal Revenue (MR) for imperfect competition.
Marginal Factor/Resource Cost (MFC)
- The additional cost incurred by employing one more unit of labor or machine, computed as the change in Total Cost (TC) divided by the change in labor (L).
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz consists of flashcards focused on essential microeconomic formulas, providing definitions for terms such as Average Fixed Cost, Average Variable Cost, and Marginal Cost. Perfect for students looking to reinforce their understanding of cost concepts in microeconomics.