Studied by 2 peopleRational producer behaviour
in an economy, firms are assumed to be having in a rational way, by always trying to maximise the profits they make
Economic cost
this is the total sacrifices made in order to bring a good or service into existence
Implicit costs
this is forgone alternative which a firm would have undertaken if it had taken note of it
Explicitly costs
monetary costs that a firm pay to outside suppliers of inputs
Total fixed cost (TFC)
costs that a firm incurs that do not change with output in a given time period
Total variable cost (TVC)
costs that a firm faces which vary with change in output within a given time period
Total cost (TC)
cost of all fixed and variable factors to produce an output TC = TVC + TFC
Average costs
costs a firm incurs to produce every unit of output
Average fixed cost (AFC)
fixed cost per unit output AFC = TFC/q
Average variable cost (AVC)
variable cost per unit output AVC = TVC/q
Average cost (AC)
unit per cost per unit output, sum of average fixed cost and average variable cost ATC = TC/q
Marginal Cost
additional cost incurred for producing one more unit of an output
Revenue
income a firm received for selling its output. Revenues can be average, total, or marginal revenue
Total revenue (TR)
total amount of money that a firm receives from selling its produced output in a given period of time
Average revenue (AR)
revenue a firm receives for selling every unit of its output
Marginal revenue (MR)
extra income earned by a firm for selling its good or service in a specified period of time
Revenue maximising
when the firm aims to increase its revenue through sales
Rational producer behaviour
in an economy, firms are assumed to be having in a rational way, by always trying to maximise the profits they make
Economic cost
this is the total sacrifices made in order to bring a good or service into existence
Implicit costs
this is forgone alternative which a firm would have undertaken if it had taken note of it
Explicitly costs
monetary costs that a firm pay to outside suppliers of inputs
Total fixed cost (TFC)
costs that a firm incurs that do not change with output in a given time period
Total variable cost (TVC)
costs that a firm faces which vary with change in output within a given time period
Total cost (TC)
cost of all fixed and variable factors to produce an output TC = TVC + TFC
Average costs
costs a firm incurs to produce every unit of output
Average fixed cost (AFC)
fixed cost per unit output AFC = TFC/q
Average variable cost (AVC)
variable cost per unit output AVC = TVC/q
Average cost (AC)
unit per cost per unit output, sum of average fixed cost and average variable cost ATC = TC/q
Marginal Cost
additional cost incurred for producing one more unit of an output
Revenue
income a firm received for selling its output
Total revenue (TR)
total amount of money that a firm receives from selling its produced output in a given period of time
Average revenue (AR)
revenue a firm receives for selling every unit of its output
Marginal revenue (MR)
extra income earned by a firm for selling its good or service in a specified period of time
Normal profit
when total revenue is equal to total cost
Abnormal profit
when total revenue is more than total cost
Revenue maximising
when the firm aims to increase its revenue through sales
Note 
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