Paper 3 Equations

Question 1

How to calculate Total cost?

Answer 1

1. TFC + TVC

or

2. Av. Cost x Quantity

Question 2

How to calculate TFC?

Answer 2

1. TC - TVC

or

2. AFC x quantity

Question 3

How to calculate Total variable cost?

Answer 3

1. TC - TFC

or

2. AVC x quantity

Question 4

How to calculate average (total) cost?

Answer 4

1. Total cost/Q

or

2. AFC + AVC

Question 5

How to calculate marginal cost?

Answer 5

1. Change in TC / Change in quantity

Question 6

Average product?

Answer 6

(Total product)/Quantity of labour

Question 7

Marginal product?

Answer 7

(Change total product)/Change in quantity of labour

Question 8

Total revenue?

Answer 8

Price x quantity

Question 9

Average revenue?

Answer 9

Total revenue/quantity = Price (P)

Question 10

Marginal revenue?

Answer 10

Change in Total revenue/Change in total quantity

Question 11

Profit?

Answer 11

1. TR - TC

Question 12

Supernormal profit?

Answer 12

1. AR > AC

Question 13

Subnormal profit (loss)?

Answer 13

1. AR < AC

Question 14

Profit maximising level of output?

Answer 14

Mr = Mc

Question 15

Revenue maximising?

Answer 15

Mr = 0

Question 16

What is the level of normal profit?

Answer 16

1. AR = AC

Breakeven point / entry limit price (no new firms enter)

Question 17

Conditions for allocative efficiency?

Answer 17

1. MC = AR

Question 18

Conditions for productive efficiency?

Answer 18

1. MC = AC

Question 19

Shutdown condition?

Answer 19

Consider shutdown when AR = AVC

The shutdown will occur when AR < AVC

Question 20

Average utility?

Answer 20

Total Utility/Quantity

Question 21

Marginal Utility?

Answer 21

Change in total utility / Change in quantity

Question 22

Utility max?

Answer 22

Occurs when Mr = 0

Question 23

What does the Marginal social cost (MSC) include?

Answer 23

Private Cost + External costs

Question 24

What does the marginal social benefit (MSB) include?

Answer 24

Private benefits + External benefits

Question 25

How to calculate GDP (methods)?

Answer 25

1. Output method
2. Income method
3. Expenditure method

Question 26

Nominal GDP?

Answer 26

(Quantity of goods/services produced and sold) x Current prices

Question 27

Real GDP?

Answer 27

1. Quantity x Constant prices

Constant prices –> Prices in Base year

or

(Nominal GDP / Price index (i.e. Deflator)) x 100

Question 28

GDP Deflator?

Answer 28

Nominal GDP/Real GDP x 100

Question 29

How to calculate GNI?

Question 30

Green GDP?

Answer 30

GDP - environmental cost

Question 31

How to calculate multiplier?

Answer 31

1. 1 / (1 - MPC)

or

2. 1 / MPW

MPW = MPS + MPI + MPT

Question 32

Unemployment rate?

Answer 32

Unemployed (meet the definition) / Labour force

Question 33

How to calculate an index number?

Answer 33

(Current value) / (raw value in the base year) x 100

Question 34

Percentage change?

Answer 34

Difference / original x 100

Question 35

How to calculate Gini-coefficient?

Answer 35

(The area between LOPE and LC) / (Total area underneath LOPE)

LOPE - Line of perfect equality

LC - Lorenz curve

Question 36

Marshall Lerner condition?

Answer 36

PEDx + PEDm > 1

Question 37

Terms of trade?

Answer 37

(Average Index price of Exports) / (Average index price of imports) x 100

Question 38

Taxable income?

Answer 38

Total income earned - tax-free allowance

Question 39

The average rate of tax?

Answer 39

(Total tax paid / Total income) x 100

Question 40

The marginal rate of tax?

Answer 40

(Change in total income tax paid) / (Change in total income) x 100