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3-23-09

# 3-23-09 - Microeconomics Class Notes Quiz He will drop the...

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Microeconomics – Class Notes – 3/23/09 Quiz – He will drop the lowest quiz score Quiz scores some did very well, some did very badly Highly varied Decreasing returns to scale – when we double our inputs, our output will be less than double. Fixed proportion production function – production function is similar to perfect complements. This is where the inputs are related by some fixed ratio. The minimum function is involved here: min{L, 1/2K} You want to get the same number out of both of the equations. END OF MATERIAL FOR QUIZ #3 COSTS TC = f(K, L, M) TC = 6L + 10,000K + 0.5M TC = f(Q) This is the function that will give us the curves that we will be using for the rest of the class: o MC o AC o AVC TC functions as a function of inputs People estimate production functions and they often model a firm’s production function using a Cobb-Douglas equation

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Use a cobb-douglas equation to transform: TC = f(Q) ….into Q =f(K, L, M) Explicit vs. Implicit Implicit costs opportunity costs Example: McDonald’s McDonald’s wants franchisees who are going to be dedicated to running the business o
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