# ECON micro 2

 The flashcards below were created by user kjel on FreezingBlue Flashcards. Production: short-run: TC= TC=TVC+TFC average cost of production-- ATC= ATC=TC/Q--> TC=ATC•Q average variable cost: AVC= AVC=TVC/Q total variable cost:TVC= (2 formulas) TVC=AVC•QTVC=TC-TFC average fixed cost: AFC= AFC=TFC/Qtherefore, TFC=AFC•Q and TFC=TC-TVC marginal cost: def. and formula, MC= additional cost incurred by producing an additional unitMC=ΔTC/ΔQalso, MC=ΔTVC/ΔQ +0*remember ΔTFC/ΔQ=0 average cost: AC= AC=AVC+AFC law of diminishing marginal rate of return to add an equal amount of a variable input (labor) into a fixed input (land), marginal output (marginal product, MP) (extra) will be at some point diminishing in relation to the AVC curve, where is the ATC curve? ATC curve always above AVC curve explain difference between curves: TFC vs AFC TFC will be a constant horizontal lineAFC will be a downward sloping curve; as Quantity ↑ the AFC ↓ and approaches zero the extra output that can be produced by using one more unit of the input marginal product; ex: adding one more worker to labor force marginal product, MP= MP=ΔTP/ΔLaborMP=ΔQ/ΔL when MP goes up or down what happens to MC and profit? MP↑ --> MC↓ --> Profit↑MP↓ --> MC↑ --> Profit↓*also, when MPhighest --> MClowest points that dictate break-even or shutdown? break-even: when profit = Average Total Cost; EP=0shutdown: when profit < Average Variable Cost Authorkjel ID278652 Card SetECON micro 2 DescriptionECON micro 2 Updated2014-07-16T05:30:10Z Show Answers