3.3 Flashcards
(17 cards)
Marginal revenue
The additional revenue of selling one extra unit of output
Average Revenue
Total revenue / Output
Total Revenue
Quantity X Price
Total costs
Fixed (does not vary with output) + variable costs (varies with output)
Average cost
The average cost of producing one unit
Marginal cost
The cost of producing one additional unit of output
Short-run costs
At least some costs are fixed.
Long-run costs
All costs can be variable
At what point does the MC curve cut the ATC curve
Where ATC is at the lowest point.
Total product
The total output produced by a firm given the factors of production
How do you calculate total product
Average product X units of variable input
Marginal product
The difference between total output when an extra unit of the variable factor
How to calculate marginal product
Change in total output / change in variable input
Average product
The total output produced by a firm
Average product calculations
total output / units of variable input
The law of Diminishing Marginal Productivity
If one factor of production is increased while others are kept fixed then productivity will eventually fall.
At first MP increases but eventually decreases due to communication issues etc.
The law of diminishing marginal productivity (labour)
As more employees are employed, productivity will eventually decrease as they begin to get in the way of each other and become inefficient. (short-run all other FOP are fixed)
