Econ test #3

Fixed cost

Cost that doesnt depend on the quantity of outpu produced (FC)

Average Fixed Cost

Fixed cost per unit of output (AFC=FC/Q)

Variable cost

Cost that depends on the quantity of output produced (VC)

Average Variable Cost

Variable cost per unit of output (AVC=VC/Q)

Total Cost

the sum of fixede cost (short run) and variable cost TC=FC(short run)+ VC)

Average total cost

total cost per unit of output (ATC=TC/Q)

Marginal cost

the change in total cost generated by producing one more unit of output (MC=ΔTC/ΔQ)

marginal product of labor

change in quantity of output produced by one additonal unit of labor (MPL=ΔQ/ΔL)

optimal consumption rule

(MU1/P1=MU2/P2)

Total revenue

Price X Quanity

Profit

TR-TC

Marginal Revenue

Change in total revenue generated by 1 additional unit of output (ΔTR/ΔQ)

Optimal output rule

MR=MC is the optimal quantity of output

TR>TC

profitable

TR=TC

Breaks even

TR<TC

loss

P>ATC

profitable with p

P=ATC

break even with P

P<ATC

loss with p