Production and Profit Formulas Flashcards

Questions and Answers

What is the total product?

The total quantity of output produced by a firm.

What is marginal product?

Is the extra or additional output resulting from one additional unit of the variable input (usually labor).

What is the formula for marginal product?

MP = Change in Total Product (TP) / Change in variable units (labor).

What is the average product?

The total quantity of output per unit of variable input (labor). Signup and view all the answers

What is the formula for average product?

AP = Total Product / Variable units (labor). Signup and view all the answers

What is total cost?

The sum of fixed and variable cost. Signup and view all the answers

What is the formula for total cost?

TC = Fixed Cost + Variable Cost. Signup and view all the answers

What is average costs?

Total cost divided by the number of units of output. Signup and view all the answers

What is the formula for average fixed cost?

AFC = Total Fixed Cost / Quantity. Signup and view all the answers

What is the formula for average variable cost?

AVC = Total Variable Cost / Quantity. Signup and view all the answers

What is the formula for average total cost?

ATC = Total Cost / Quantity. Signup and view all the answers

What is the relationship between average total cost?

ATC = Average Fixed Cost + Average Variable Cost. Signup and view all the answers

What is marginal costs?

The extra or additional cost of producing one more unit of output. Signup and view all the answers

What is the formula for marginal costs?

MC = Change in TC / Change in Q (or) MC = Change in TVC / Change in Q. Signup and view all the answers

Study Notes

Production Concepts

Total Product: Represents the overall quantity of goods produced by a firm.
Marginal Product: Refers to the additional output produced when one more unit of a variable input (usually labor) is employed.
Marginal Product Equation: Calculated as the change in Total Product divided by the change in variable units (labor).

Average Product

Average Product: Indicates the quantity of output produced per unit of variable input (labor).
Average Product Equation: Determined by dividing Total Product by the number of variable units (labor).

Costs

Total Cost: The cumulative sum of fixed costs and variable costs associated with production.
Total Cost Equation: Defined as Total Cost equals Fixed Cost plus Variable Cost.

Average Costs

Average Costs: Obtained by dividing total costs by the quantity of output produced.
Average Fixed Cost Equation: Average Fixed Cost equals Total Fixed Cost divided by Quantity.
Average Variable Cost Equation: Average Variable Cost equals Total Variable Cost divided by Quantity.
Average Total Cost Equation: Average Total Cost equals Total Cost divided by Quantity.
Relationship: Average Total Cost can also be derived from adding Average Fixed Cost and Average Variable Cost.

Marginal Costs

Marginal Costs: Defined as the additional cost incurred from producing one more unit of output.
Marginal Cost Equation: Calculated by finding the change in Total Cost divided by the change in quantity produced or alternatively, the change in Total Variable Cost divided by the change in quantity.

Description

Test your knowledge on key concepts related to production, costs, revenues, and profits with these flashcards. Each card presents definitions and equations that are essential for understanding economic production dynamics.