disc8 - DISCUSSION SECTION 8 Cost Minimization At the same...

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DISCUSSION SECTION 8 Cost Minimization Last week : Profit Maximization At the same time: How much to produce and sell - y (given input price and output prices). What level of inputs to choose to produce it - x 1 ,x 2 (given a technology; production function). Today : Cost Minimization: “second stage” of profit maximization What level of inputs to choose to produce a given y - x 1 ,x 2 (given a production function). Geometrically: Isoquant is given and we want to find the lower isocost line that allows the firm to reach the given isoquant. -------------------------------------------------------------------------------------------------------------------- - Optimality Condition : slope of isoquant = slope of isocost line 2 1 2 , 1 w w TRS = 2 1 2 1 w w MP MP = -------------------------------------------------------------------------------------------------------------------- - Short Run VS Long Run Special Cases: 1. ) , min(
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disc8 - DISCUSSION SECTION 8 Cost Minimization At the same...

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