Microeconomics UNIT 3

what causes increasing returns

specialisation. when workers specialise, productivity increases.

returns (increasing, decreasing, negative) are seen by

total product

total product stages

total product increases at increasing rate, increases at decreasing rate, decreases (becomes negative)

what is the formula for marginal cost of labour

wage/marginal product

fixed costs

costs which do not change with the change in quantity produced. so you can produce 100 apples or 0 apples and the cost will remain the same.

variable costs

costs which increase as production increases. this is the sum of all the costs of production.

graph for fixed, total and variable costs

which cost curve will shift with a change in fixed cost

if there is a change in fixed cost, the ATC will shift up or down depending on whether the FC increases or decreases

which cost curve will shift with a change in variable cost

MC, AVC, ATC

what is the distance between ATC and AVC

AFC (decrease as output increases)

formula for AVC, AFC and ATC

accounting profits

TR-explicit costs

productive efficiency for perfect competition

only in long run. p=min atc

where is the firm’s supply curve?

MC above AVC

the market’s long run supply curve

perfectly elastic at the firm’s minimum ATC price