AP Microeconomics
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| Marginal Product (MP) equation | ΔTP / Δinputs
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| Average Product (AP) equation | TP / units of labor
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| Average Fixed Cost (AFC) equation | FC / Q
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| Average Variable Cost (AVC) equation | VC / Q
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| Average Total Cost (ATC) equation | TC / Q
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| Marginal Cost (MC) equation | ΔTC / ΔQ
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| What shifts when FIXED costs change? | AFC & ATC
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| What shifts when VARIABLE costs change? | MC, AVC, & ATC
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| increasing returns to scale | when the output MORE than doubles
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| constant returns to scale | when the output doubles
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| decreasing returns to scale | when the output LESS than doubles
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| Total Revenue (TR) equation | P x Q
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| Profit equation | TR - TC
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| shut down rule | a firm should continue to produce until the additional revenue from each new output equals the additional cost
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| types of market structures | - Perfect Competition
- Monopolistic Competition
- Oligopoly
- Monopoly
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| characteristics of Perfect Competition | - many small firms
- identical products/ perfect substitutes
- low barriers
- seller has no need to advertise
- firms are price TAKERS
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| characteristics of Monopoly | - one large firm
- unique product (no close substitutes)
- high barriers
- price MAKERS
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| characteristics of Oligopoly | - less than 10 large producers
- identical or differentiated products
- high barriers
- price MAKER
- mutual interdependence
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| characteristics of Monopolistic Competition | - large number of sellers
- differentiated products
- lots of advertising
- low barriers
- some control over price
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| types of barriers to entry | - economies of scale (bigger = cheaper)
- superior technology
- geography or ownership of raw materials
- government created barriers (ex: patents)
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| productive efficiency | producing at the lowest possible cost
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| allocative efficiency | producing at the amount most desired by society
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| Where is PRODUCTIVE efficiency located? | where PRICE meets ATC
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| Where is ALLOCATIVE efficiency located? | where PRICE meets MC
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