A detailed examination of microeconomic principles related to the behavior and decisions of firms, covering aspects such as short-run and long-run costs, revenue theory, market structures (perfect competition, monopolies, oligopolies), and efficiency. It encapsulates the essence of the document, in...
Short Run Anything below threeyears
short run determined
by the time it taketo increase in the Qoffixed factors
anti
Firms find itdifficulttochange level of productiondue to timeconstaint matterof fixedfactors
Tochange levelof production in S R firms use more variablefactors
Variable factors factors of production that can bechanged example workers
Long Run
In thelongrun allfactors are variable Firms PLAN IN THE LIR to change their fixedvariable
planto makemoreproducts
Note More workers Limited fixedfactors Lessproductive
, Law of Diminishing Returns
Extra mathematical note on APand MP
Ap is maximised when AR M
Diminishingreturns
yma.gg
at anypoint me arapisincreasingandviceversa j ff.
Howwill thisinfluence a business'sdecision
É
have
employment so efficient or not a
production 0 Unitsoflabour
Economic cost
The economic costof producing a good firm's opportunity cost
2 kinds
1 Explicit costs
2 Implicit costs
Explicit costs
the thingthat yougive up
Factors that are purchased fromother and not already ownedby the firm
Example Wages of a worker
Buying a machine
Implicit costs
Factors that are already owned by the firm There is still opportunitycost
here b c it still costs the firm whenthey usethisfactor
E.g Firm owns a building
, Opportunity cost theycouldhave use this officespace to other firms
insteadof using it as their main office
Short run costs
supply chain engineers
Total fixedcost TFC not included in cost analysistable
Total variable cost Tvc quantity of variable factors v x cost of each factor
Totalcost TFC t TVC
Long run costs
can change fired factor and variable factor
plan to change
Act fixed factors T
Cost Analysis table Plot Me AC AP MP
2.4 40
2.1 35
0000
1.8 30
1.5 25
1.2 20 sorrow
i
Egapes Ac
aa beachunitsoflabour
aremoreprone
0.6 to boost Prosit
0.3
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