Individual Supply

Marginal cost

the additional cost incurred in producing one more unit

Marginal revenue

the extra money your business gets from selling an additional unit

Law of supply

the tendency for quantity supplied to be higher when the price is higher

Reason #4 why MC tends to rise

Increasing opportunity cost of time

Variable costs

costs which vary with the quantity of output you produce (wage bill)

Fixed costs

Costs that don't change when you change the quantity of output produced

Reason #1 why MC tends to rise

Diminishing returns (less and less)

Reason #2 why MC tends to rise

Diseconomies of scale (x2 inputs, less than x2 outputs)

Competitive supply curve is also

Marginal cost curve

Reason #3 why MC tends to rise

Rising input prices

The Rational Rule for Sellers

Sell one more item if the marginal cost has not risen to be greater or equal to the marginal benefit

Shutdown condition

Shut down and produce nothing if your revenues do not exceed your recoverable (non-sunk) costs

Law of Diminishing Returns

When a fixed input it held constant, beyond some point increases in the variable input will yield smaller and smaller increases in output

Individual supply curve

a graph plotting the quantity of an item that a business plans to sell at each price

long run

the planning horizon over which all inputs can be changed

short run

the planning horizon over which some inputs cannot be changed (size)

In a competitive market, marginal revenue is equal to

the price of the additional unit you sell

economies of scale

when increasing all of your inputs leads to a proportionately larger increase in output

diseconomies of scale

when increasing all of your inputs leads to a proportionately smaller increase in output