Econ100B Lecture8 - 4-29

Econ100B Lecture8 - 4-29 - Economics 100B: Lecture 8 S....

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Economics 100B: Lecture 8 S. Nageeb Ali April 29, 2008
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Economics 100B: April 29, 2008 Retrospective s Diminishing MRTS s Way we’ve done in class: by observation: e.g., |MRTS| = K/L s Way some of you tried to do in exam: treat K as constant, take derivative wrt L. d/dL (|MRTS|) = -K/L 2 s But K isn’t a constant! b Recognize that along an isoquant K is a function of L, and dK/dL < 0 b Use chain rule
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Economics 100B: April 29, 2008 Retrospective s Diminishing MRTS s Way we’ve done in class: by observation: e.g., |MRTS| = K 2 s Way some of you tried to do in exam: treat K as constant, take derivative wrt L. d/dL (|MRTS|) = 0 s But K isn’t a constant! b Recognize that along an isoquant K is a function of L, and dK/dL < 0 b Use chain rule
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Economics 100B: April 29, 2008 Where we are… s Discussing how much a firm should produce s Look for optimum, given 2 nd order condition; for competitive market b FOC: p = MC(q) b SOC: MC(q) is increasing in q s Determine shutdown rule
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Econ100B Lecture8 - 4-29 - Economics 100B: Lecture 8 S....

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