2.4 Micro Flashcards
1
Q
How do you calculate MR?
A
Change in TR/ Change in Output
2
Q
How do you calculate AR?
A
TR/ Output
3
Q
How do you calculate TR?
A
Q x P
4
Q
What occurs in perfect comp?
A
D=AR=MR
5
Q
Where is unitary elasticity on a TR curve?
A
The top of the curve
6
Q
What is normal profit?
A
The minimum profit a firm must make in order to stay in business
7
Q
What is abnormal profit?
A
Profit above normal profit
8
Q
What is the role of profit?
A
Creation of business incentives The creation of worker incentives The creation of shareholder incentives Profits and resource allocation Profit and economic efficiency Profit as a reward for innovation and risk taking Profit as a source of business finance Profit sends out a signal about the health of the economy
9
Q
What does a competitor creating supernormal profit create an incentive for?
A
For firms to increase production and for new firms to enter the market
10
Q
What do firms use retained profit for?
A
To reinvest
The helps to develop new products and improve production processes, leading to dynamic efficiency
