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Economics

Quizzes & Activities

Theory of the Firm - Key Calculations (Quizlet Activity)

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Here are some key short calculations useful when staying the theory of the firm for Year 2 microeconomics.

Key terms to revise

  • Average Cost: Total cost divided by output
  • Marginal Cost: Change in total cost / change in output
  • Average Fixed Cost: Total fixed cost divided by output
  • Average Variable Cost: Total variable cost divided by output
  • Shut-down price: Where price = minimum average variable cost
  • Profit maximisation: Where MR=MC
  • Average revenue: Total revenue / output
  • Marginal revenue: Change in total revenue / change in output
  • Revenue maximisation: When marginal revenue = zero
  • Sales maximisation (normal profits): Output where AC = AR
  • Productive efficiency: Output where average cost is minimised
  • Allocative efficiency: Output where price = marginal cost

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