Microeconomics Formulas Flashcards

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Questions and Answers

What is the formula for Average Fixed Cost?

ATC - AVC (correct)

AVC + AFC

TFC + TVC

TFC ÷ Qs (correct)

What is Average Variable Cost?

TVC ÷ Qs

How is Average Total Cost calculated?

AVC + AFC

What is the formula for Average Product?

TP ÷ Units of Labor Signup and view all the answers

What does Marginal Cost represent?

∆ in TC ÷ ∆ in Qs Signup and view all the answers

How is Marginal Product calculated?

∆ in TP ÷ ∆ in Labor Signup and view all the answers

What is the formula for Total Cost?

TFC + TVC Signup and view all the answers

How is Total Revenue calculated?

P × Qs Signup and view all the answers

What does Total Product equal?

TR − TC Signup and view all the answers

How is Average Revenue calculated?

TR ÷ Qs Signup and view all the answers

What is the formula for Marginal Revenue?

∆ in TR ÷ ∆ in Qs Signup and view all the answers

What does XED (Cross-price Elasticity) represent?

%∆ in QD of G₁ ÷ %∆ in P of G₂ Signup and view all the answers

What does YED (Income Elasticity) measure?

%∆ of QD ÷ %∆ of Y (Income) Signup and view all the answers

How is PED (Elasticity of Demand) calculated?

%∆ in QD ÷ %∆ in P Signup and view all the answers

What identifies the Break Even Point?

ATC intersects D Signup and view all the answers

What defines Productively Efficient?

Lowest ATC Signup and view all the answers

What does Allocatively Efficient mean?

P = MC Signup and view all the answers

How is profit maximized?

MC = MR Signup and view all the answers

What defines the point to Maximise Revenue?

MR = 0 Signup and view all the answers

What indicates the Socially Optimal Point?

MC = D Signup and view all the answers

How is Marginal Revenue Product calculated for perfect competition?

MP × P Signup and view all the answers

What does Marginal Factor/Resource Cost represent?

∆ in TC ÷ ∆ in L 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).

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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.