Econ100B Lecture4 - 4-10

Econ100B Lecture4 - 4-10 - Economics 100B: Lecture 4 S....

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Economics 100B: Lecture 4 S. Nageeb Ali April 10, 2008
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Economics 100B: April 8, 2008 Summary of Where We Were s Talking about costs of production, C(q) = VC(q) +F
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Economics 100B: April 8, 2008 Summary s Short Run: b Capital is fixed at K b MC(q) = w / MP L b AVC(q) = wL / q = w/AP L s Long Run b Capital and Labor are flexible b Develop concept of isocost line b Similar to budget line from consumer theory s Tangency of indiff curve and budget line = optimal for consumer s Tangency of isoquant and isocost line = optimal for producer
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Economics 100B: April 8, 2008 Long-Run Costs s In long-run, all costs are adjustable b Fixed cost of land: can sell off some land b Can fire managers / CEO b Can sell planes s As before, firms have variety of input choices b Firm will determine optimal mix based on price of inputs
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Economics 100B: April 8, 2008 Long-Run Costs s r is rental rate of capital b Even if firm owns capital, can think about implicit rental rate s Slope of isocost curve = - w / r
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This note was uploaded on 07/22/2008 for the course ECON 100B taught by Professor Rauch during the Spring '07 term at UCSD.

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Econ100B Lecture4 - 4-10 - Economics 100B: Lecture 4 S....

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