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Micro Year 2 > Costs and Revenues > Flashcards

Costs and Revenues Flashcards

(50 cards)

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1
Q

what is the short run

A

atleast one fixed factor of production

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2
Q

what is the long run

A

all factors of production are variable

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3
Q

examples of fixed costs

A

rent
salaries
interest on loans

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4
Q

examples of variable costs

A

wages
utility bills
raw material costs

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5
Q

formula for TFC

A

TC - TVC
or
AFC x Quantity

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6
Q

formula for AFC

A

TFC / Quantity
AC - AVC

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7
Q

formula for AVC

A

TVC / Quantity
AC - AFC

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8
Q

shape of TFC graph

A

horizontal line

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9
Q

shape of AFC

A

downwards sloping

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10
Q

shape of AVC / what does it do

A

U shape
falls then rises

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11
Q

why does AVC fall then rise

A

falls until law of diminishing returns kicks in

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12
Q

what is the law of diminishing returns

A

when adding an additional factor of production results in a smaller increase in output than the previous addition

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13
Q

formula for MP

A

change in TP / change in quantity

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14
Q

formula for AP

A

TP / Quantity

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15
Q

shape of MP

A

rises then falls

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16
Q

shape of AP

A

rises then falls

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17
Q

what must the MP graph do

A

cut AP at its highest point

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18
Q

why does MP originally rises

A

as more workers are hired, they begin to specialise and therefore become more productive.
under-utilised fixed factors of production begin to be used more efficiently

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19
Q

why does MP fall

A

due to the law of diminishing returns
the fixed factors of production have become a constraint on production so efficiency decreases

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20
Q

shape of TP

A

rises then falls
maximised when MP is 0

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21
Q

when is TP maximised

22
Q

formula for MC

Study These Flashcards
A

change in total cost / change in quantity

23
Q

formula for AC

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A

TC / Quantity
or
AFC + AVC

24
Q

shape of MC

Study These Flashcards
A

falls then rises
cuts AC at AC’s lowest point

25
shape of AC
falls then rises u shape is cut by MC at its lowest point
26
when does MC cut AC
at its lowest point
27
why does MC fall
because as MP rises, due to specialisation and utilisation of factors of production, MC falls
28
why does MC rise
the law of diminishing returns kicks in as MP falls meaning MC rises as the fixed factors of production constraints production
29
shape of TC curve
like the tan graph
30
shape of TVC curve
like the tan graph
31
shape of TFC
horizontal line
32
why do the TVC and TC curves become steeper
they go from increasing returns to labour TO decreasing returns to labour
33
shape of LRAC
Multiple U shapes Downward sloping
34
why does the LRAC curve fall
economies of scale
35
why does the LRAC curve plateau
constant returns to scale
36
why does the LRAC curve rise
diseconomies of scale
37
formula for TR
P x Q
38
formula for AR
TR / Q = P
39
formula for MR
change in total revenue / change in total quantity
40
shape of AR in perfect competition
horizontal
41
shape of TR in perfect competition
linear
42
shape of AR in imperfect competition
downwards sloping from left to right
43
shape of MR in imperfect competition
downwards sloping line twice as steep as AR
44
shape of TR in imperfect competition
rises then falls when MR is at 0
45
what is average revenue (AR) the same as on a graph
demand
46
when is total revenue maximised
when MR = 0
47
what causes a change in price/profit levels
fixed costs variable costs demand
48
what will a change in fixed costs shift
AC
49
what will a change in variable costs shift
AC and MC
50
what will a change in demand shift on costs and revenues diagram
AR and MR

Micro Year 2 (11 decks)

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