Formulas
What is the formula to find Marginal Product (MP)?
MP = ∆TP/∆L
What is the definition of Production Function?
The way a firm combines inputs to produce an output.
In a marginal product and average product graph, when MP is above AP, what is happening to the AP?
AP is rising.
What is the definition of Long Run?
The period of time long enough for a firm to change all of its inputs; the period of time long enough for a firm to alter it's plant capacity.
What is the formula to find Average Total Cost (ATC)?
ATC = TC/Q
What is the formula to find Average Product (AP)?
AP = TP/L
What is the definition of Variable Inputs?
Inputs that can be changed in the short run to change production.
In a marginal product and average product graph, when MP is below AP, what is happening to the AP?
AP is falling.
What is the definition of Total Product?
The total quantity of output produced by a certain amount of inputs.
What is the formula to find Total Cost (TC)?
TC = FC+VC
What is the formula to find Marginal Cost (MC)?
MC = ∆TC/∆Q
What is the definition of Fixed Inputs?
Inputs that cannot be changed in the short run to change production.
In a marginal product and total product graph, when MP is increasing, what is happening to the TP?
TP is increasing at an increasing rate.
What is the definition of Marginal Product?
The additional output produced by one more unit of a variable input, often labor
What is the other formula to find Average Total Cost (ATC)?
ATC = AFC + AVC
What is the formula to find Average Fixed Cost (AFC)?
AFC = FC/Q
What is the definition of Short Run?
The period of time during which there are fixed inputs; the period of time too short for a firm to alter it's plant capacity.
In a marginal product and total product graph, when MP is is positive but decreasing, what is happening to the TP?
TP is increasing at a decreasing rate.
What is the definition of Average Product?
The average quantity of output produced by one unit of a variable input, often labor.
What is the formula to find Total Revenue?
Total Revenue = Price * Quantity
What is the formula to find Average Variable Cost (AVC)?
AVC = VC/Q
What is the definition of Plant Capacity?
A firm's maximum potential level of production.
In a marginal product and total product graph, when MP is zero, what is TP?
TP is at a maximum.
What is the definition of Fixed Cost?
A cost that must be paid even when a firm's output is zero; a cost is the same at all output levels
What is the formula to find Accounting Profit?
Accounting Profit = Total Revenue - Explicit Costs