Equations and conditions (micro) Flashcards
Total cost
TFC + TVC
or
AC x Q
TFC
TC - TVC
or
AFC x Q
TVC
TC - TFC
or
AVC x Q
Average cost
TC/Q
or
AFC + AVC
Marginal cost
Change in TC/change in Q
Average product
Total product/Q of labour
Marginal product
Change in total product/change Q of labour
Total revenue
Price x quantity
Average revenue
Total revenue/quantity = price
or
Do P x Q then divided by Q - then cancel out Qs and left with P
Marginal revenue
Change in total revenue/change in Q
Profit
TR - TC
SNP
AR > AC
Loss
AR < AC
Profit max
MC = MR
Revenue max
MR = 0
AC = AR
Normal profit, sales max, breakeven, entry limit price
Allocative efficiency
D = S
MSB = MSC
P = MC
Productive efficiency
Min. point on AC
AC = MC
X efficiency
At any point on AC
Dynamic efficiency
LR SNP is necessary
Minimum efficient scale
Lowest quantity level when AC curve stops decreasing
Shutdown condition
Will consider shutdown if AR = AVC
Will shutdown if AR < AVC
Average utility
Total utility/Q
Marginal utility
Change in total utility/change in Q
Utility max
Marginal utility = 0
Social cost
Private cost + external cost
Social benefit
Private benefit + external benefit
Profit max: labour market
MRP = Marginal cost of labour
Gini coefficient
Area between Lorenz curve and line of perfect equality / total area beneath line of perfect equality
Marshall-Lerner condition
PED of x + PED of m > 1
This is required for currency depreciation to improve country’s current account position
Taxable income
Total Y - tax free allowance
Average rate of tax
Total Y tax paid / total level of Y x 100
Marginal rate of tax
Change in total income tax paid / change in total income
x 100
