5 Steps to a 5 AP Microeconomics, 2014-2015 Edition

220 › Important Formulas and Conditions

11. Average Variable Cost and Average Product of
    Labor:
    AVC =w/APL

Chapter 9

1. Profit Maximization Point:

MB =MC or MR =MC

2. Demand for Firm’s Product (Perfectly
   Competitive Market):

P=MR =AR

3. Profit:

’=TR -TC =P¥qe-TC =qe¥(P-ATC)

4. Breakeven Point:

P=ATC

5. Shutdown Point:

P<AVC or TR <TVC

6. Allocative Efficiency:

Produce output qwhere Pc=MR =MC

7. Excess Capacity in Monopolistic Competition:

Qatc– Qmc

8. Perfectly Competitive Long-Run Equilibrium:

P=MR =AR =MC =ATC

9. Monopoly Long-Run Equilibrium:

Pm>MR =MC

Chapter 10

1. Marginal Revenue Product:

=

Change in total revenue

Change in resource quantity

=MR ¥MPL

a. Under perfectly competitive price-taking

conditions:

MRPc=MR ¥MPL=P¥MPL

b. Under conditions of market power, MR <P:

MRPm=MR ¥MPL<MRPc

2. Marginal Resource Cost:

=

Change in total resource cost

Change in resource quantity

= Wage (in a competitive resource market)

3. Least-Cost Hiring Rule:

MPL/PL=MPK/PKor equivalently,

MPL/MPK=PL/PK

4. Profit Maximizing Resource Employment:
   MRP =MRC


5. Monopsony Hiring Decision:
   MFC =MRP >W

Chapter 11

1. Socially optimal output:
   MSB =MSC


2. Marginal Tax Rate:

=(Dtaxes due)/(Dtaxable income)

3. Average Tax Rate:

=(Total taxes due)/(Total taxable income)

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