Download presentation
Presentation is loading. Please wait.
Published byArnulf Madsen Modified over 5 years ago
1
Unit 3 Refer to activity packets for information not in notes
4
Productivity Measures
5
Productivity Measures
Law of Diminishing Marginal Returns Short Run Fixed Capital Variable Labor Long Run All resources are variable
6
Productivity Measures
Law of Diminishing Marginal Returns
11
Cost Measures
12
Revenue v. Profit Revenue = money received from sale of good
Profit = Revenue - Cost
13
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
14
3 Rules Produce Q where MR=MC Charge P at Profit Maximizing Q
Shutdown if TR < TVC AR (P/MR) < AVC
15
Efficiency in PC PE AE Lowest ATC p/q where MR=MC
p/q where Quantity Demanded = Quantity Supplied
16
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
17
Long Run Supply Expanding production can drive up resource costs, drive down resource costs, or not change resource costs
18
Draw a bunch of overlapping SRATCs representing an increasing # of plants in the LR.
19
At which point does investment in a new plant become productively efficient?
20
LONG RUN ONLY!
22
Minimum Efficient Scale (MES)
23
Minimum Efficient Scale (MES)
Minimum output at which lowest LRATC is achieved
24
Minimum Efficient Scale (MES)
In perfect competition, is MES at a low or high Q?
Similar presentations
© 2025 SlidePlayer.com. Inc.
All rights reserved.