The candidate should be able to:

1. calculate, interpret, and compare accounting profit, economic profit, normal profit, and economic rent;

2. calculate and interpret and compare total, average, and marginal revenue;

3. describe a firm’s factors of production;

4. calculate and interpret total, average, marginal, fixed, and variable costs;

5. determine and describe breakeven and shutdown points of production;

6. describe approaches to determining the profit-maximizing level of output;

7. describe how economies of scale and diseconomies of scale affect costs;

8. distinguish between short-run and long-run profit maximization;

9. distinguish among decreasing-cost, constant-cost, and increasing-cost industries and describe the long-run supply of each;

10. calculate and interpret total, marginal, and average product of labor;

11. describe the phenomenon of diminishing marginal returns and calculate and interpret the profit-maximizing utilization level of an input;

12. determine the optimal combination of resources that minimizes cost.