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24 Cards in this Set

  • Front
  • Back

profits


(πE versus πA)
TR - TCA - opportunity costs TR - TCA

TR - TCA - opportunity costs



TR - TCA

constant returns
∆Y/∆X is constant output increases at constant rate

∆Y/∆X is constant



output increases at constant rate

increasing returns
∆Y/∆X is positive and increasing output increases at increasing rate

∆Y/∆X is positive and increasing



output increases at increasing rate

decreasing returns
∆Y/∆X is positive but decreasing output increases at decreasing rate

∆Y/∆X is positive but decreasing



output increases at decreasing rate

negative returns
∆Y/∆X is negative output is decreasing

∆Y/∆X is negative


output is decreasing

immediate run

all inputs fixed

short run
≥ 1 input is fixed

≥ 1 input is fixed

long run
all inputs are variable   length of long run = amount of time it takes for all variables to become fixed

all inputs are variable



length of long run = amount of time it takes for all inputs to become variable

TPP
output vs 1 variable input

output vs 1 variable input

APP
Y/X average productivity per unit variable input

Y/X



average productivity per unit variable input

MPP
∆Y/∆X additional TPP gained from one additional unit input

∆Y/∆X



additional TPP gained from one additional unit input

marginal analysis

additional ____ gained from one additional unit input



compares benefits and costs of every activity, one unit at a time

AC = ATC



AFC



AVC

TC/Y, overall cost per unit output



TFC/Y



TVC/Y or P1/APP

TR
Py * Y

Py * Y

Fixed Costs (TFC)



vs



Variable Costs (TVC)

do not vary with level of output (more inputs = same amount outputs)



vary with level of output (more inputs = more outputs); Law of Diminshing Marginal Returns

MC

∆TC/∆Y or P1/APP



cost of producing one additional unit output

typical average & marginal cost curves


per unit costs - (ATC, AVC, AFC, MC)

relationship between TC & TPP (productivity)

per-unit productivity (APP, MPP)



vs



per-unit costs (ATC, MC)

typical average cost curves (AC, MC, AVC)
one where costs decrease then increase

one where costs decrease then increase

constant cost firm
AC & MC are same for all units output

AC & MC are same for all units output

decreasing cost firm
per unit costs decrease with increasing output MC < AC so avg costs being pulled down

per unit costs decrease with increasing output



MC < AC so avg costs being pulled down

increasing cost firm
per unit costs increase with increasing output MC > AC so avg costs being pulled up

per unit costs increase with increasing output



MC > AC so avg costs being pulled up

TC
TC = TFC + TVC typically increases at decreasing rate, then increases at an increasing rate due to diminishing marginal returns

TC = TFC + TVC



typically increases at decreasing rate, then increases at an increasing rate due to diminishing marginal returns