Allocative efficiency: when marginal cost = marginal value
Technical efficiency: reached when economy’s factors of supply are used to maximize production
Also known as efficiency in production
Marginal product: additional output produced per period when one more unit of an input is added
Law of diminishing marginal returns: as one amount of an input increases, marginal returns will eventually decrease
Average product:
Total product curve: shows relationship between total amount of output produced vs. number of units of an input used
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Short run: time frame where at least one factor of production is constant
Economies of scale: exist over range of output where long-run average cost curve slopes down
When is there perfect competition?
Economic profits: total revenue - total cost
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