|Short-run market supply curve ||the summation of the supply curve of the individual firms|
|Economic Profit ||In competitive, profits are zero in the long run|
|Implications of perfectly competitive markets ||Firms will earn zero economic profit in the LR.
Consumers consider only price when choosing which firm to buy from.
Any firm that rises price above market will lose all sales.
Firms can freely enter and exit industries.`|
|Marginal Revenue ||Change in revenue resulting from a one-unit increase in output|
|Short run profit ||for a price taking firm, if p>SATC, firm is earning profit.|
|Shutdown Condition ||If p>AVC, then a portion of fixed costs are covered.
If p<AVC, firm should shutdown.|
|Long Run Competitive Equilibrium ||All firms are maximizing profit.
No firm incentive for enter and exiting.
QS = QD|
|Marginal Cost (MC) ||Increase in cost resulting from the production of one extra unit of output.|
|Diseconomies of Scale ||long run average cost is rising|
|Economies of Scale ||Exist when long run average cost is declining|
|Difference between MP and MC ||MP: extra output produced by one more unit of an input. MC: is the cost of that extra unit of output|
|Learning Curve ||shows the extent to which hours of labor needed/unit of output fall as the cumulative output increases|
|Difference between q and TVC ||q: production function. Output on y axis and labor on x axis. Upward arch. TVC: total variable cost. $ on y axis, output on x axis. U curve.|
|Technological Change ||1)production function
3)Product Transformation Curve
4)Total Cost Curve
5) Average Cost Curve
6)Marginal Cost Curve|
|Production Function ||upward shift|
|Isoquant ||inward shift; output held constant|
|Product Transformation Curve ||upward shift|
|Total Cost Curve ||rightward shift|
|Average cost curve ||downward shift|
|Marginal cost curve ||downward shift|
|difference between AP and AVC ||AP: output divided by units of capital (workers) AVC: variable cost divided by level of output|
|Expansion Path ||Shows the least cost input bundles for each level of output when all inputs can varied|
|Average Cost (AC) ||Firm's total costs divided by level of output (aka Average Total Cost)|
|Cost Minimizing Input Choices ||Costs are minimized when the marginal product of the last dollar spent on labor is equal to the marginal product of the last dollar spend on capital|
|Average Variable Cost (AVC) ||Variable cost divided by the level of output|
|Average Fixed Cost (AFC) ||fixed cost divided by level of output|
|Short run supply curve ||represented by the portion of the short run marginal cost curve that lies above minimum AVC|
|Isoquant ||combines all factor combinations which give the same output (capital on y-axis, labor on x-axis, first half of U graph)|