2010_lecture_13_ho

# 2010_lecture_13_ho - Economics 101Lecture 13 The Basic...

This preview shows pages 1–5. Sign up to view the full content.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Economics 101Lecture 13 The Basic Model of the Profit Maximizing Firm II George J. Mailath March 1, 2011 In our last episode Production function q = f ( x 1 , x 2 , . . . , x n ) , and isoquants. MRTS=marginal rate of technical substitution MRTS k = k = f / f / k . A perfectly competitive firm takes prices as given . That is, the prices are, from the firms perspective, parametric or predetermined . (Just as the consumer took prices as parametric.) In our last episode, cont. Profit maximization : max ( q , x 1 , ... , x n ) pq n i = 1 w i x i subject to q = f ( x 1 , . . . , x n ) . Two approaches. 1 Eliminate q first: max ( x 1 , ... , x n ) pf ( x 1 , . . . , x n ) n i = 1 w i x i . 2 Do cost minimization first: max q pq C ( q , w ) , where C ( q , w ) = min ( x 1 , ... , x n ) n i = 1 w i x i subject to q = f ( x 1 , . . . , x n ) . Solution vs Characterization The firm knows prices, but must choose level of output and inputs. Solving the firms profit-maximization problem...
View Full Document

## This note was uploaded on 03/02/2011 for the course ECON 101 taught by Professor Dannicatambay during the Spring '08 term at UPenn.

### Page1 / 12

2010_lecture_13_ho - Economics 101Lecture 13 The Basic...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online