2.3 Marginal cost and marginal revenue Flashcards
How do you calculate average fixed costs?
Average fixed costs = Total fixed costs / Quantity
How do you calculate average variable costs?
Average variable costs = Total variable costs / Quantity
How do you calculate average total costs?
Average total costs = Average fixed costs + Average variable costs
Define marginal cost
Addition to total cost resulting from producing one additional unit of output
Define average fixed cost
Total cost of employing the fixed factors of production, divided by output
Define average variable cost
Total cost of employing the variable factors of production, divided by output
Define average total cost
Total cost of producing a particular level of output, divided by the size of output
Define marginal revenue
Additional to total revenue resulting from the scale of one more unit of the product
Define short run average cost
Cost per unit of output when at least 1 FoP are fixed
Define long run average cost
Cost per unit of output when all FoP are variable
What is a price taker?
A small firm that has to accept the market price
Define average revenue
Total revenue divided by output
Define total revenue
All the money received by a firm from selling its total output
What are the 6 conditions for perfect competition?
- Large number of buyers and sellers
- Identical products (homogeneous)
- No barriers to entry / exit
- Consumers can buy as much as they want and firms can sell as much as they wish to supply at a given market price
- An individual consumer or supplier cannot affect the ruling market price
- Perfect information
What is the shape of a perfectly competitive demand curve?
Perfectly elastic
