What is the economic profit formula?
total revenue-(explicit +implicit costs) / economic profit
produce more
When MP is above the AP what happens?
AP is rising
Characteristics of perfect competition
free entry and exit in the long run and zero economic profit in the long rhn
what is economies of scale?
long run ATC decreases as output increases
Explicit costs include?
typical business expenses such as land, labor, and capital
If MR=MC what should the firm do?
If the Mp is below the Ap what happens
the AP is falling
Allocative efficiency
what is diseconomies of scale?
long run atc increase as output increases
What is implicit cost?
the income the entrepreneur gives up to take on their current endeavor
If MR<MC what should the firm do
the firm should produce less
When the mp is negative what happens to the Tp
TP decreases
when P = minimum ATc what happens
Productive efficiency
what is constant return to scale
long run atc is constant as output increases
Why would someone want to start their own business?
feeling good, being your own money, new opportunities, or potential for a greater income
At the current quantity that the firm is selling, the firm has Marginal Cost of $200 while Marginal Revenue is $175. Which of the following is true?
The firms profits would increase if the firms decreased quantity is sold
When the amp is positive but decreasing what happens to the TP
Tp will start increase at a decreasing rate
what are long run adjustments
no barrie's to entry, zero economic profit in the long run, easy of entry and exit from the market
what is the minimum efficient scale
helps determine the number of firms in a market
Normal profit is when total revenue covers what?
out of pocket expenses and the entrepreneurs forgone income
At its current quantity, a firm finds that in order to increase potential profit, it must decrease its production. If P= price, MR = Marginal Revenue and MC = Marginal Cost, which of the following reflects the firm's current situation?
MR<MC
Where is the TP when the MP is at zero
it's max
Supply increases price decreases for a long run adjustment. true or false?
true
if a firms long run average total cost increases as output increases the firm is experiencing
diseconomies of scale