Lecture 6 - Lecture 6 January 25 Notes Next week Lecture...

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Next week: Lecture Monday, Wednesday; TA session Friday Lecture 6: January 25 Notes
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Optimal Choice of Firm's Input Level Analyze one input, quantity is z Outputs produced depend on z, so that revenue and other costs depend on z: R(z), OC(z) Special case: price taker in input (purely competitive) Firm’s input level has no impact on the market price at which the input can be purchased. ( ) ( ) ( ) z z R z OC z P z
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Optimal Choice of Firm's Input Level: Purely Competitive Input Markets 2 2 2 2 2 2 ( ) ( ) ( ) 0 dR z d OC z d d z d z z z d ( ) ( ) ( ) z z R z OC z P z ( ) ( ) ( ) 0 z d z dR z dOC z P dz dz dz ( ) ( ) Net Marginal Value Product of z z dR z dOC z P dz dz
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Profit Maximization: Purely Competitive Input Markets ( ) ( ) { ( ) ( )} dR z dOC z d R z OC z dz dz dz z P z * z
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