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MicroEcon Exam III
Study all terms and memorize EVERYTHING
| Term | Definition |
|---|---|
| Short Run (SR) | A period during which at least one resource (that the firm is using) is fixed. |
| Long Run (LR) | A period during which all resources are variable. |
| Total Cost (TC) | FC + VC |
| Fixed Cost (FC) | does not vary with output |
| Variable Cost (VC) | varies with output |
| Average Total Cost (ATC) | |
| Average Variable Cost (AVC) | |
| Average Fixed Cost (AFC) | |
| Marginal Cost | |
| Increasing marginal returns to variable input | |
| diminishing marginal returns to variable input | |
| link between the average cost curves and MC | IF MC is lower than the average costs, average costs will be decreasing |
| Shape of LRAC curve (Long run average cost curve) | |
| Marginal Revenue (MR) | |
| explicit costs | |
| implicit costs | |
| accounting profit | TR - explicit costs |
| econ profit | TR - (Explicit + Implicit costs) |
| normal profit | 0 Econ. Profit |
| A firm with Zero econ profit will NOT | alter anything because they are doing just as well as they could be doing elsewhere |
| Marginal Product (MP) (of labor) | ΔTP/ΔL or. ΔQ / ΔL |
| Law of Diminishing Marginal Returns | As a variable is added to a fixed input, MP eventually falls |
Created by:
emilia2004
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