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Unformatted text preview: Q =short-run average variable cost AVC ' VC Q =short-run average total cost ATC ' TC Q ATC=AFC+AVC =fixed output along an isoquant Q w=wage rate i=user cost of capital =long-run average total cost LAC ' TC Q =long-run marginal cost LMC ' TC Q =marginal rate of technical substitution=slope of isoquant MRTS ' * K L * ' * MP L MP K * = , i.e., slope of isoquant equals slope of isocost line MRTS ' * K L * ' * MP L MP K * w i is the Principle of Equal Marginal Products per Dollar MP L w ' MP K i =profit R=revenue M =marginal profit= Q MR=marginal revenue= R Q MC=marginal cost= C Q P=MC is the optimality condition for perfect competition P $ AVC is the short-run no-shut-down condition...
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