1. FUNDAMENTAL STUFF
   1. DERIVATIVE
   2. FIRMS
      1. DEF
         1. an ORG
            1. employs FoP
            2. produce or provide
            3. GnS
      2. TYPE
         1. sole proprietarorship
         2. partnership
         3. company
            1. private/public firms
      3. OpC
         1. the cost of any Rs
            1. highest alternative value given up to pursue some activities
         2. Real OC
            1. maximum quantity of output forgone in physical terms
         3. Money OC
            1. maximum value of output forgone in monetary terms
2. COSTS & PROFITS
   1. PROFITS
      1. Accounting profit
         1. =
            1. TR – Total explicit costs
      2. Economic profit
         1. =
            1. TR – (Total explicit costs + Total implicit costs)
            2. TR – OpC of all Rs
      3. Normal profit
         1. =
            1. break-even
   2. COSTS
      1. IMPLICIT
         1. non-monetary
            1. not actually paid by as costs
            2. OpC of self-owned, self-employed Rs used by a firm
      2. EXPLICIT
         1. moneytary
            1. actually paid for non-owners = (the Rs supplier)
            2. current expenses for purchasing/hiring Rs required by the firm
   3. DISTINCTION of SR & LR
      1. SHORT RUN
         1. the time frame, during which
            1. at least 1 of INPUTS is FIXED
         2. changed by adding variables Rs -> fixed plant (technology)
      2. LONG RUN
         1. the time frame, during which a firm can
            1. adopt new tech
            2. vary the size of physical plants
         2. VARY ALL INPUTS, even TECHNOLOGY
3. LONG RUN COSTS
   1. Economies of scale
      1. ATC decreases as Q increases
      2. cost advantages that a business obtains due to expansion
      3. REASON
         1. workers specialisation
         2. flexibility
            1. organize production process more effectively
         3. acquire some production inputs at lower cost
            1. buy in BULK
   2. Constant returns to scale
      1. smallest # of outputs
      2. a firm can minimise LRAC
   3. Diseconomies of scale
      1. ATC increases as Q increases
      2. REASON
         1. Duplication of effort
         2. Management does nothing but 'manage'
         3. Inertia
            1. unwillingness to change
         4. Cannibalization
            1. own products are competing with each other
         5. Inelasticity of Supply
            1. heavily dependent on its resource S
            2. have trouble increasing production
   4. LRAC
      1. DEF
         1. represent ATC over the long run
            1. all inputs are variable
         2. almost always <<< short run ATC
            1. companies have the FLEXIBILITY to change big components of their operations
            2. achieve OPTIMAL EFFICIENCY
4. SHORT RUN COSTS
   1. TOTAL COSTS
      1. =
         1. VARIABLE COSTS
            1. +
            2. FIXED COST
      2. VARIABLE COSTS vary during different stage of production
         1. change in MPC
   2. ATC
      1. =
         1. AFC
            1. +
            2. AVC
   3. DEF
      1. the extra cost of producing one more unit of a product
   4. EFFECTS
      1. compared with marginal revenue (MR), we can decide whether to produce one more (less) unit is profitable.
      2. with AVC
         1. MC below AVC
         2. AVC decreases
         3. MC is falls faster than AC
         4. MC above AVC
         5. AVC increases
         6. MC rises faster than AC
      3. with MPL
         1. w/ MPL
         2. eg: Labour
      4. MC curve must cut AC curves at the min of AC
   5. the slope
      1. AVC
         1. the point & the origin
      2. MC
         1. the point & the previous point
5. SHORT RUN PRODUCTION
   1. DEF
      1. the time frame, at least one of the FoP is fixed
      2. PRODUCTION FUNCTION
         1. Q = F(K,L)
            1. Total output = Q
   2. APL
      1. USAGE
         1. output/unit of labour
         2. assumption
            1. all factors fixed, except L
         3. inverse relationship with AVC
            1. if AP rises, AVC would fall
      2. Q: total output
      3. L: number of labour units
   3. MPL
      1. USAGE
         1. the change in output resulting from employing an added unit of labour
      2. ΔQ: change in Q
      3. ΔL: change in the unit of labour
      4. EFFECTS with APL
         1. intersect MPL
            1. max
         2. APL > MPL
            1. APL increases
         3. APL < MPL
            1. APL falls
      5. EFFECTS with TP
         1. positive
            1. TP decreases
         2. = 0
            1. TP max
         3. negative
            1. TP increases
   4. LAW of DEMINISHING RETURNs
      1. add more variable inputs TO same fixed inputs
         1. cause MP of the VARIABLE INPUT: decline
      2. the 'n" shape of MPL