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Jack Carr

ECO100 CARR TERM TEST 2 CONCEPTS PRODUCERS IN THE SHORT RUN Short Run (SR) quantities of at least one of the rms resources is xed Long Run (LR) quantities of all of the rms resources can be varied, but its technology is xed Very Long Run quantities of all of the rms resources and its technology can be varied economic prots = total revenues - opportunity costs Total Product (TP) total output produced for various levels of labour Marginal Product (MP) increase in total product resulting from a one-unit increase in labour slope of the TP curve ( change of TP change of L ) Average Product (AP) total product per unit of labour (TPL) Total Cost = total xed cost (independent of the level of output) + total variable cost (increases as output increases) Marginal Cost (MC) increase in total cost resulting from a one-unit increase in output slope of the TV curve (change in TC change in Q) Average Total Cost (ATC) TC per unit of output (TCQ) ATC=AVC (average variable cost) + AFC (average xed cost) PRODUCERS IN THE LONG RUN all factors are variable Long Run Average Cost Curve traces out the lowest attainable average total cost at each output when both capital and labour inputs can be varied Prot maximization is equivalent to cost minimization. rms choose the combination of capital and labour such that MPkPk=MPlPl
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