Definitions
What is Total Cost?
The sum of fixed and variable costs
What is the formula for Marginal Product?
ΔTP/ΔL
What happens to TP when Mp is increasing?
TP also increases at an increasing rate
MR=MC
What happens in the long-run adjustment process?
The cost of production can stay the same, increase, or decrease
What is Plant Capacity?
A firm's maximum potential level of production
What is the formula for Marginal Cost?
ΔTC/ΔQ
When MP is positive and decreasing what is TP doing?
TP is increasing at a decreasing rate
What happens when TR>TC?
The firm earns an economic profit
What is Entry?
Entry occurs when economic profits attract firms to enter the market
What is Total Product?
The total quantity of output produced by a certain amount of outputs
What is the Average Cost of Production?
FC/Q
What happens when MP is zero?
TP is at its maximum
When TR=TC?
The firm breaks even; earns a normal profit
What is Exit?
When firms start making economic loses
What is Variable Cost?
A cost that changes as output changes
What is Marginal Revenue?
ΔTotal Cost/Δ Quantity
When MP is above AP, AP is what?
AP is rising
When TR<TC?
The firm earns an economic loss
What is Zero-Profit?
Zero-profit is the profit level the firm is at either when it exits or enters the market
What is Fixed Cost?
A cost that must be paid even when a firm's output is zero
What is the formula for Economic Profit?
Total Revenue - (Explicit+Implicit Costs)/Economic Profit
What happens to AP when MP is negative?
AP would be falling
If MR<MC?
Then the firm should produce more output
What is the Long Run?
The period of time long enough for a firm to change all of its inputs