ECO 2030. Principles of Economics-Price Theory
Theory of the business firm
Profit
- Profit: Π = TR - TC
- Variable cost, fixed cost
- Explicit and implicit costs
- Economic and accounting profit
Production
- Production function
- Marginal product of labor: MPL =
ΔQ/ΔL
Short Run Costs
- TC = VC + FC; ATC = TC/Q
- VC = w�L; AVC = VC/Q
- FC = r�K; AFC = FC/Q
-
ATC = AVC + AFC
- MC = ΔTC/ΔQ =
ΔVC/ΔQ = W � ΔL/ΔQ =
W/MPL
Long Run Costs
- Economies and diseconomies of scale
- Constant returns to scale
- Long run ATC curve