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Unformatted text preview: Maximizing rule: MR=MC, in order to maximize profit you must produce the amount that makes MR=MC e) Normal Profit: EconProfit=0, which means a positive accounting profit f) Examples 3) Costs a) Total (TC)= FC+VC b) Fixed (FC): costs that dont change with respect to quantity produced c) Variable (VC): costs that change with output, increase as you produce more; ex: labor d) Marginal (MC): change in total cost from producing one more unit of output; they are all variable e) Average: cost per unit, =Total/Q i) Total (ATC)= TC/Q ii) Fixed (AFC)= TFC/Q iii) Variable (AVC)= TVC/Q f) Average/marginal cost relationship; if MC > ATC then ATC goes up; if MC < ATC then ATC goes down g) Examples 4) Time- nothing to do with calendar, deals with cost time a) Short run: FC > 0 b) Long run: FC = 0...
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- Spring '06