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