TwitterHere is a list of some of the basic microeconomics formulas pertaining to revenues and costs of a firm. Remember when you're using these formulas there are a variety of assumptions, namely, that the the firm is profit-maximizing (making as much money as they can.)
Here are the basic formulas (work out your own algebra to find alternatives):
- Average Total Cost (ATC) = Total Cost / Q (Output is quantity produced or 'Q') Average Variable Cost
(AVC) = Total Variable Cost / QAverage Fixed Cost (AFC) = ATC - AVC
Total Cost (TC) = (AVC + AFC) X Output (Which is Q)
Total Variable Cost (TVC) = AVC X Output
Total Fixed Cost (TFC) = TC - TVC
Marginal Cost (MC) = Change in Total Costs / Change in Output
Marginal Product (MP) = Change in Total Product / Change in Variable Factor
Marginal Revenue (MR) = Change in Total Revenue / Change in Q
Average Product (AP) = TP / Variable Factor
Total Revenue (TR) = Price X Quantity
Average Revenue (AR) = TR / Output
Total Product (TP) = AP X Variable Factor
Economic Profit = TR - TC > 0
A Loss = TR - TC < 0
Break Even Point = AR = ATC
Profit Maximizing Condition = MR = MC
Explicit Costs = Payments to non-owners of the firm for the resources they supply.
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Econ Tags: ATC, break even point, marginal cost, marginal revenue, MC, Microeconomics, MR, TCOther Economics Articles
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Comments ( 14 )
you are the best, and very useful, I was having hard time calculating total cost, how to calculate actually but no website could help me beside this, you are the greastes, and thank you and keep on upgrading us,
Happy to help, glad they worked for you.
Hi: I am really having a hard time calculating the total product. The formula above says:
TP=AP X Variable Factor while
AP=TP/Variable Factor
So it's like a catch22 - to calculate TP, you have to know the AP, but to calculate AP, you have to know the TP !!
Say I have a demand function: Q=50L+6L^2+0.5L^3
I calculated L=4
Solution provided =
For Variable Factor=1, TP=50+6-0.5=55.50, Thus AP=55.50 and MP=55.50 - cool !!
But for Variable Factor=2, TP=120.00 - How? This is what I don't understand.
AP=TP/VF=60, and MP=Change in TP value=120-55.50=64.50
Can you help me understand how to calculate the TP?
Solution provided for VF=3, TP=190.50, AP=63.50 & MP=70.50
for VF=4, TP=264.00, AP=66.00 & MP=73.50 and so on.
Thank you very much for your help.
Best Regards,
JD
Are you sure the solution for #1 is correct? If you insert the variable factor it's not TP=50+6-0.5=55.50 but TP=50+6^2-0.5^3^ =
Is it not?
I am having trouble finding the break even point. If i have the following information how do i find it? I have the MC, AVC and AC
total cost function of a firm is tc = 1050 + 10qsquare + 8q find the mc of firm when the quantity produced is 15. iam unable to find the solution , mc shows the answer 20q + 8 how it is calculated pls help me.
If 20q + 8 is the answer then that's just basic calculus off of 10q2 + 8q
You are the one where to find required knowledge in economic thinking and I will always visit your website. Thank you
I have this problem and can not figure out how to compute. Can you help me to compute?
Example. output (Q) is given let's say 3, Total Revenue (TR) is 96, and total Cost (TC) is 44. I need to compute marginal revenue and average revenue functions. I can compute the average revenue, but got confused in computing marginal revenue.
Thank you.
Try posting in the forum with your question.
Hi, I've been given the ffg infomation and need to find the optimal level of output for profit maximizatio (i.e MR=MC)
TP TFC TVC
0 100 0
1 100 90
2 100 170
3 100 240
4 100 300
5 100 370
6 100 450
7 100 540
8 100 650
9 100 780
10 100 930
So far this is what I have calculated:
TC TR MR
100 0
190 110 110
440 220 110
820 330 110
1300 440 110
1950 550 110
2800 660 110
3880 770 110
5300 880 110
7120 990 110
9400 1100 110
And
MC
90
250
380
480
650
850
1080
1420
1820
2280
I still do not know how to solve for MR=MC Mathematicaly.
Your help will be much appreciated
Might be a trick questions in that MR = MC so in this theoretical case if you have MC then you have MR and work backwards.
can you list for me the basic formulas for elasticity?
any BASIC info to help me understand introductory economics would be appreciated.