disc8 - DISCUSSION SECTION 8 Cost Minimization Last week :...

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Unformatted text preview: 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 =--------------------------------------------------------------------------------------------------------------------- ¾ Short Run VS Long Run ¾ Special Cases: 1. ) , ⇒ y w min( ) , ( 2 1 2 1 x x x x f =...
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This note was uploaded on 08/08/2008 for the course ECON 301 taught by Professor Hansen during the Spring '08 term at University of Wisconsin Colleges Online.

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disc8 - DISCUSSION SECTION 8 Cost Minimization Last week :...

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