Paper 3 key equations and conditions (MICRO) Flashcards by Rhys Bimpong

Q

Total cost

A

TFC + TVC or AC x Q

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Q

TFC

A

TC - TVC or AFC x Q

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Q

TVC

A

TC - TFC

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Q

Average cost

A

TC/Q

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Q

Marginal Cost

A

Change in TQ/Change in Q

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Q

Profit

A

TR - TC

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Q

Average product (labour)

A

TP/Q of labour

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Q

Supernormal profit

A

AR>AC

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Q

Marginal product

A

Change in TP/Change in Q of labour

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Q

Subnormal profit

A

AR<AC

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Q

Total Revenue

A

P x Q

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Q

Profit Max

A

MR = MC

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Q

Average revenue

A

TR/Q = P

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Q

Revenue Max

A

MR = 0

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Q

Marginal Revenue

A

Change in Total Revenue/ Change in Quantity

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Q

AC= AR

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A

Is either normal profit, sales max, break even or Entry limit price

Q

Allocative efficiency

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A

D=S or MSB=MSC or P=MC

Q

Productive efficiency

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A

Bottom of AC! (AC=MC)

Q

X efficiency

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A

At any point on AC

Q

Dynamic efficiency

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A

LR Supernormal profit

Q

Minimum efficient scale

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A

AT the lowest point of AC on cost curve

Q

Shut down condition

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A

AR = AVC or AR<AVC

Q

Average Utility

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A

TU/Q

Q

Utility max

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A

MU = 0

Social Cost

Personal Cost(PC) + External Cost(EC)

Social Benefit

Personal Benefit (PB) + External Benefit (EB)

Profit Max (Labour market)

MRP=MCʟ

PED

%Change in Quantity Demanded/ %Change in price

PES

%Change in Quantity supplied/%Change in price

XED (Cross- price elasticity)

%Change in Quantity demanded A/%Change in price B

YED (Income elasticity of demand Y=income)

%Change in quantity demanded/%Change in income