terms
what are explicit and implicit costs?
explicit is out of pocket costs and implicit is opportunity costs
MC=MR
what curves are on a per unit cost graph?
MC, AFC, ATC, and AVC
characteristics of perfect competition
1000s of firms
firm is the price taker
identical products
no barriers
profit/loss in short run
zero economic profit in the long run
what is the relationship between FC, TC, and VC?
FC+ VC=TC
ATC - AVC=?
AFC
How do you find accounting profit?
total revenue - explicit costs
What shape does a MC curve look like?
it goes up, looks like a nike symbol
explain what zero economic profit is
all resources are being efficiently used and economic profit is equal to zero
how do you find total revenue?
sales price x quantity sold
what is marginal product? (MP)
additional output
how do you find economic profit?
total - (explicit - implicit) revenue
what does a MP curve look like?
it goes down, so upside-down nike symbol
what does the demand curve look like on a competitive firms graph?
it is horizontal
what is specialization?
focus labor on a specific type of production
What is the law of diminishing marginal returns?
as variable resources are added to fixed resources, the output will increase then start to decrease
how do you find marginal cost?
total cost/Quantity output
at what points does MC intersect ATC and AVC on a graph?
at their lowest points
where is the shut down point ?
intersection of AVC and MC, if revenue cant cover variable costs then that is the shut down point
what is allocative efficiency ?
when price=mc
what does MRDARP stand for?
Marginal Revenue= Demand= Average Revenue =Price
formula for MR
change in total revenue/change in quantity
what happens when a firm is in long run equilibrium?
it is experiencing zero economic profit
Where is MC a firms supply curve?
at AVC and higher
where is the break down point?
ATC lowest point