ECN2802

Summer 2015

Review for Exam 3

Dr. Dao

Accounting vs. Economic Profit

Short run vs. Long run

Marginal Product

Average Product

Law of Diminishing Marginal Productivity

Production Function

Fixed costs vs. Variable Costs

Total Costs

Average Variable Costs

Average Fixed Costs

Average Total Cost

Marginal Cost

Why the law of diminishing marginal productivity does not apply in the long run

Primary reason for economies of scale

Perfectly Elastic Demand

Economies of scale and Diseconomies of scale along long run average total cost curve

Typical long run average cost curve

Shape of short run average total cost curve

Relationship between long run and short run average total costs

Expected Economic Profit per unit

Necessary conditions for perfect competition

Perfectly competitive firms as price takers

Market demand curve in a perfectly competitive industry

Marginal revenue

MR = P for a perfectly competitive firm

Supply curve for a perfectly competitive firm

TR-TC approach for finding the profit maximizing level of output

Shut down price

Long run equilibrium in perfectly competitive market