3. Profit And Cost Maximization Flashcards
1
Q
profit
A
= total revenue - total cost
2
Q
total revenue
A
= price x quantity
3
Q
marginal revenue
A
= sale price p
4
Q
isoquants
A
show all combinations of 2 inputs that produce the same level of output
5
Q
isocost lines (long term cost)
A
- show all combinations of 2 inputs that have the same cost
- the slope of an isocost line changes as input prices change
6
Q
optimal input mix (cost minimization/ profit maximization)
A
occurs when the isoquant is tangent to the isocost lines
