MGEA02H3 : Production Function, Monopoly Firm, International Trade and Open Economy
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MGEA02H3 Full Course Notes
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Tc = f (q: relevant terms and formulas: Total cost (tc) = f (q) = tvc + tfc. Total variable cost (tvc) = price of labor x l. Total fixed cost (tfc) = price of capital x k. Average cost (ac) = tc / q. Average variable cost (avc) = tvc / q. Average fixed cost (afc) = tfc / q. Marginal cost (mc) = dtc / dq. Marginal productivity of labor (mpl) = dq / dl. Average productivity of labor (apl) = q/l: short term equilibrium: In the short term, one significant assumption is that no firm will enter the market. Also, as long as the price is greater than the short run shut down price, no firm will exit the market. Profits in the short run can be both positive or negative. Short term shut down price will be the minavc, i. e. , it is the price at the intersection of mc and avc: long term equilibrium.