Acceptable logotypeECO 2030. Principles of Economics-Price Theory

Theory of the business firm

Profit

  1. Profit: Π = TR - TC
  2. Variable cost, fixed cost
  3. Explicit and implicit costs
  4. Economic and accounting profit

Production

  1. Production function
  2. Marginal product of labor: MPL = ΔQ/ΔL

Short Run Costs

  1. TC = VC + FC; ATC = TC/Q
  2. VC = w×L; AVC = VC/Q
  3. FC = r×K; AFC = FC/Q
  4. ATC = AVC + AFC
  5. MC = ΔTC/ΔQ = ΔVC/ΔQ = W × ΔL/ΔQ = W/MPL

Long Run Costs

  1. Economies and diseconomies of scale
  2. Constant returns to scale
  3. Long run ATC curve