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