What are the 4 main short run cost curves to understand?
โข Marginal cost (MC)
โข Average fixed cost (AFC)
โข Average variable cost (AVC)
โข Average (total) cost (AC)
What is the Marginal cost (MC)?
change in total production cost comes from producing one additional unit
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What are the 4 main short run cost curves to understand?
โข Marginal cost (MC)
โข Average fixed cost (AFC)
โข Average variable cost (AVC)
โข Average (total) cost (AC)
What is the Marginal cost (MC)?
change in total production cost comes from producing one additional unit
What are the short run cost calculations?
Work this out
Average and marginal cost diagram
Show average variable cost diagram
Show Average Variable cost diagram, showing a rise in fixed cost
Show Average Variable cost diagram, showing a rise in variable cost
Whatโs marginal revenue?
additional revenue that comes from the sale of one additional unit.
๐๐ฃ๐๐๐๐๐ ๐๐๐ฃ๐๐๐ข๐ = ๐ก๐๐ก๐๐ ๐๐๐ฃ๐๐๐ข๐/๐๐ข๐ก๐๐ข๐ก
๐๐๐๐๐๐๐๐ ๐๐๐ฃ๐๐๐ข๐ = โ ๐ก๐๐ก๐๐ ๐๐๐ฃ๐๐๐ข๐/โ ๐๐ข๐ก๐๐ข๐ก
Where are revenues maximised?
at an output level where ๐๐ = 0, that is, there is no change in total revenue for selling an extra unit.
In a monopolistic market if increasing quantity decreases price, then it stands to reason that marginal revenue will fall as quantity increases.
Work this out:
Show the calculations on a graph, what does it illustrate?