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what are tariffs and how do they affect supply and demand curves?
-tax on imported goods
-increase input costs (supply curve moves left, higher price)
-decrease in quantity demanded (movement left along demand curve)
why are tariffs made?
because of protectionism (protect domestic products)
what is equation for profits
total revenue - total costs
TR = price * quantity
TC = explicit costs + opportunity costs
what is normal rate of return?
when you earn just enough to keep investors and owners satisfied
when economic profit is 0
what is short-run vs long-run
short-run is when one factor of production is fixed (like land, machines) and a firm cannot enter or exit an industry
basically like a snapshot in time
it is possible for a firm to produce 0 things in short-run
long-run is when all costs are variable, firms CAN enter or exit industry
what is a price-taker
describes a perfectly competitive firm that takes MARKET PRICE as a GIVEN
what is the optimal method of production
a method that will minimize cost
what is isoquant?
the different combinations of inputs that yield the same output
basically like indifference curve
what is isocost?
basically budget constraint graph, but the x and y axis are for labor and capital
the axes are determined by a given total cost
how to find total costs when given capital (K) and labor (L) units
TC = price of capital * # of K units + price of labor * # of Labor units
how to find economic profit
it is accounting profit (revenue - costs) - economic cost (opportunity cost + total cost)
how to find average product
total product / # of workers (or whatever is incrementing by 1)
how to find optimal production technique (when given technology option)
choose the technology that costs the least based on the given prices
how to find total cost for short run
the equation is TC = total fixed cost + total variable cost
how to find average fixed cost (short run, given a table)
the equation is AFC = total fixed cost / quantity
AFC decreases as quantity increases
what is relationship between MC and returns to labor
