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lecture_10_for_students

# lecture_10_for_students - Lecture 10 Costs(continued Click...

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Click to edit Master subtitle style 1/1/11 Lecture 10 Costs (continued)

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1/1/11 Example q q TFC AFC TFC Answer 800 and 800 100 8 : = = = × = q. of function a as L find to need we Now L w TVC × = L for equation this Solve 59 . 9 100 52 . 1 52 . 1 6 . 0 4 . 0 6 . 0 4 . 0 6 . 0 L L K L q = =
1/1/11 Example continued 67 . 1 67 . 1 55 . 0 023 . 0 24 q q L w TVC = × = × = 67 . 0 55 . 0 q TVC AVC : AVC find can we TVC, Using q = = q q AFC AVC AC q TFC TVC TC q dq dTVC MC 800 55 . 0 800 55 . 0 92 . 0 67 . 0 67 . 1 67 . 0 + = + = + = + = = =

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1/1/11 Effects of specific or unit taxe on costs q of unit per 10 \$ = t AC and , TC MC, AVC, TVC, affects tax This 10 10 10 10 10 + = + = + = = + = + = b a b b a a b a b a AC AC MC dq dTVC dq dTVC MC AVC AVC q TVC TVC Consider the furniture firm example
1/1/11 Costs in the LR

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1/1/11 In the LR firm can adjust all inputs. Costs of LR ≤ Costs of SR There is no fixed cost in the LR=>TC=TVC In LR: LTC, LAC,LMC
1/1/11 Reminder L K q Remember that isoquant is a LR concept as both K and L are changing

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1/1/11 Isocost line rK wL TC + = TC isocost line Isocost shows the combination of inputs that generate the same cost level. Assuming w and r are fixed:
1/1/11 L r w r TC K - = r w dL dK - = Isocost line slop e 1 TC 2 TC 3 TC L K r TC 1 w TC 1 Remember that isocost is a LR concept as both inputs are changing Isocost line continued

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1/1/11 Minimizing cost w=\$24 and r=\$8 Point x is where the cost of producing 100 units of output is minimized At tangency: = > = > r w MRTS =
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