1. Unit 3a Refer to activity packets for information not in notes.
Pay close attention to the shape of the various production/cost/revenue curves.
Pay close attention to the relationship between curves
Master the ability to calculate cost and revenue values from a variety of given information

4. Productivity Measures

5. Fixed versus Variable Resources, Inputs, Factors Costs
Fixed: Cannot change (incr./decr.) in the short run
Examples:
Variable: Can change (incr./decr.) in the short run
Costs
Fixed: The cost of fixed resources
Variable: The cost of variable
resources
FIXED
VARIABLE

6. Short Run v. Long Run Short Run Long Run
Period during which at least one resource is fixed
Long Run
Period during which all resources are variable

7. Productivity Measures
Law of Diminishing Marginal Returns

12. All workers (units of Labor) are equal.
Diminishing Marginal Returns
specialization
Assumption
All workers (units of Labor) are equal.
Diminishing Marginal Returns
specialization

14. AVC and MC should start at the same point at Q1
*AVC and MC should start at the same point at Q1 *ATC and AFC should start on the y-axis at the same point

15. Answers to 3-3

16. Productivity Measures
Law of Diminishing Marginal Returns

21. Cost Measures

22. Revenue v. Profit
Revenue = money received by producer from sale of good
Cost = money paid by producer to produce good
Profit = Revenue – Cost

23. P4 AP Econ Review LRE and SR profit Loss versus Shutdown Music Video
Practice FRQs
Practice Chart (will post answers)
Quiz- 13 multiple choice and 1 FRQ

24. Profit Terms Accounting Profit = Economic Profit =
Total Revenue – Total Explicit Cost
Economic Profit =
Total Revenue – (Total Explicit Cost + Total Implicit Cost)
Π (uppercase Pi)- symbol for economic profit
Normal Profit- occurs when Π = 0

25. Important Rules Produce Q where MR=MC Shutdown if
D/MR/AR/P drops below AVC

26. Return to Long Run Equilibrium (PC)
NO Barriers to Entry/Exit
Short Run Economic Profits
Firms Enter the Market in the LR
Market Supply Shifts right
Firm MR/AR/D shifts down to min. ATC
Short Run Economic Losses
Firms Exit the Market in the LR
Market Supply Shifts left
Firm MR/AR/D shifts up to min. ATC

27. 9-10pm Google Doc Chat Post questions and I will respond
Quiz- 13 multiple choice and 1 FRQ

28. Stop Here for Tuesday’s Quiz

29. Efficiency in PC Production Efficiency Allocative Efficiency
minimum ATC
Allocative Efficiency
p=MC

30. Short Run v. Long Run Short Run Long Run
Some resources are fixed (factory size)
Some resources are variable (labor)
Long Run
All resources are variable

31. Long Run Supply
Expanding production can drive up resource costs, drive down resource costs, or not change resource costs

32. Draw a bunch of overlapping SRATCs representing an increasing # of plants in the LR.

33. At which point does investment in a new plant become productively efficient?

34. LONG RUN ONLY!

36. Minimum Efficient Scale (MES)

37. Minimum Efficient Scale (MES)
Minimum output at which lowest LRATC is achieved

38. Minimum Efficient Scale (MES)
In perfect competition, is MES at a low or high Q?