Term
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Definition
LRAC: Long Run Average Cost Function
dLRAC/dQ=0
Solve for q = Optimal firm size |
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Term
| Cost Minimization with Multiple Inputs |
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Definition
Use Cobb Douglass or Partial Derivatives = MRTS
MRTS=w/r
Plug back into equation, solve for K or L |
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Term
| Short Run Profit Maximizing Under Competition |
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Definition
Maximizing Quantity of Production:
Set MC=0
Total Revenue:
Price*q
Profit:
TR-TC
Producer Surplus
TR-VC |
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Term
| Long Run Equilibrium Under Competition |
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Definition
Set dAC=0 to find quantity
Plug q back into AC formula to find p
To find Q of industry as a whole. Solve for P using Q.
To find industry size, divide Q/q. |
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Term
| Profit Maximization Single Price Monopoly |
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Definition
Find Q buy setting MC = MR
Solve for P using Q.
Firm's profit=TR-TC |
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