Ch 2 · Theory of Production and Cost

5 concept points · 5 formulas · 4 exam-critical points.

⭐ Important points (exam-critical)

• ⭐MC cuts AC and AVC at their minimum points.
• ⭐When MP > AP, AP rises; when MP < AP, AP falls.
• ⭐Economies of scale (internal: tech, managerial; external: industry-wide infrastructure).
• ⭐U-shaped AC due to law of variable proportions in short run.