COST AND REVENUE DIAGRAMS Flashcards
Total revenue curve for a price taker (perfect competition)
Decrease in total revenue for a price taker (perfect competition) due to fall in market price
Marginal Revenue MR curve for a price taker (perfect competition); MR is the gradient of the TR curve
Average and marginal revenue curves for a price taker (perfect competition
Total revenue curve for a price maker (imperfect competition)
Average revenue curve for price maker
Average and marginal revenue curves for price makers (imperfect competition)
Relationship between total, average and marginal revenue for price taker
Outputs showing elasticity of demand derived from AR = D curve
Relationship between PED and MR and AR curves
Increase in total revenue for a price maker (imperfect competition), due to increase in demand
Revenue curves for price makers and price takers – a comparison
Relationship between total product curve and average product and marginal product curves.
no idea on this one yet - seems to be a labour market one
Total cost curves: TFC + TVC = TC
Total fixed cost and average fixed cost curves
Average fixed cost curve
Average total cost curve
Average fixed cost and average total cost curves
Fall in average total costs
Average fixed, average variable and average total cost curves (ATC= AFC+AVC)
Short run cost curves
Total costs = average cost x output TC=AC x Q
Marginal cost curve
MC and ATC together
Long run average cost curve
Long run average cost curve showing the returns to scale
External economies of scale
X-efficiency: Attainable AC = Actual AC
Long run average cost curve for Tesla (Point B shows some X-inefficiency)
Shift in MC and AC after a decrease in variable costs
Impact of an increase in fixed costs on the average total cost curve; no change in MC
Impact of an increase in fixed costs on the average fixed cost curve and average total cost curve
Total cost and total revenue for a price taker (perfect competition)
Perfect competition: Short run equilibrium
Perfect competition: short run supernormal profits
Short run profit-maximising equilibrium for perfect competition
Perfect competition – long run equilibrium (Normal profit only)
Market determines the price taken by the perfect competitor in the short run; supernormal profits can be made
Long-Run Equilibrium for Perfect Competition
Short run supernormal profits attract new firms to join the market increasing the market supply and reducing the market price; this continues until all supernormal profits of the perfectly competitive firm are competed away in the long run
Area showing the total variable costs at the profit-maximising output in perfect competition. (AVC = ATC – AFC and TVC = AVCxQ)
Short run v long run equilibrium for perfect competition
(Supernormal profit is competed away as new firms join the market reducing the market price)
Impact on output of a fall in fixed costs in perfect competition
Impact on supernormal profit of a fall in fixed costs in perfect competition
Impact on output of a fall in the market price in perfect competition
Supernormal profit at price P becomes normal profit only at P1
Cost and revenue curves for price maker (imperfect competition)
Profit maximising output and price for a price maker
Supernormal profit for monopoly
Profit maximising monopoly
Supernormal profit = P1abC1 or P1C1 x Q1
Loss minimising output and price for a price maker
Monopoly profit-maximising output compared to allocatively efficient output
Showing how the monopoly price could be lower than the price under perfect competition if the monopoly can gain economies of scale
- Q1 = profit-maximising output
- Q4 = productively efficient output
- Q5 = allocatively efficient output
- Q2 = revenue=maximising output
- Q3 = sales-maximising output
Supernormal profit at revenue maximising output
Total costs at revenue-maximising output
Sales maximising output
Making normal profit AC=AR
Comparison of profit maximisation to sales maximisation in imperfect competition
Monopoly operating at productively efficient output
Minimum AC
Equilibrium of firm that has sales-maximisation goal
AC=AR and normal profit only
Supernormal profit in short run for monopolistic competition
Monopolistic competition long run equilibrium
Monopolistic competition short run and long run equilibrium
Supernormal profit in the short run is competed away in the long run
Impact of an increase in demand or revenue on price and output and profits for price maker
Impact of an increase in variable costs on supernormal profits for price maker
Impact of an increase in fixed costs on supernormal profits for price maker
Impact of an increase in demand on price and output for a price maker (imperfect competition)
Increase in fixed costs in imperfect competition
Price discrimination for off peak and on peak goods/services
Oligopoly kinked demand equilibrium price and quantity for profit maximiser
MR is disjointed because of the kink in the demand (AR) curve
Kinked demand in oligopoly: increase in costs has no impact on equilibrium price and output; prices are rigid/stable/sticky
Lower average costs in oligopoly compared to perfect competition due to greater economies of scale
Natural monopoly; profit-maximising output is Q; if marginal cost pricing output is Q1 which achieves allocative efficiency but cause firm to run at a loss
Possible pricing options for a firm in monopolistic competition in the long run
