A study of processes relevant to the electron-positron pair plasmas thought to exist in Active Galactic Nuclei is undertaken. The processes considered include: Compton scattering, pair annihilation, two photon pair production, synchrotron emission, e-e bremsstrahlung, and Coulomb scattering. Approximations used in the past to treat these processes in the context of a kinetic code are examined, and improvements are presented. A two-moment scattering formalism is presented to allow for important energy dispersion effects in scattering. This improved treatment of microphysical processes is implemented in a time-dependent, kinetic code incorporating Klein-Nishina effects on both the pair and photon distributions, relativistic thermal Comptonization, and synchrotron reabsorption.The effects of pair plasma reprocessing on the emergent radiation spectrum are examined. Time-varying and stationary spectra are computed. Good qualitative agreement with previous calculations is found, except when the differences are attributable to the improved treatment of the microphysics. These differences can be substantial, particularly in the "photon-starved" regime where the effects of Coulomb scattering by suprathermal pairs off thermal pairs significantly modify the spectra. The spectral response of the pair plasma to variations in the particle injection is found to depend sensitively on the plasma parameters. A transitional spectrum may look very different from the spectra of either the stationary initial or final states. The highest energies (gamma-rays) are found to respond most rapidly to changes and should vary more than the X-rays. Pair plasmas can produce soft X-ray excesses. This happens under conditions independently favored by current pair plasma-Compton reflection models of the hard X-ray spectrum.
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