9_CostsinLR

9_CostsinLR - Read the book! COSTS IN THE LONG RUN Pindyck,...

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Read the book! COSTS IN THE LONG RUN Pindyck, Rubinfeld & Koh 7.3, 7.4
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put prices Input prices The price of labour = wage rate w The price of capital = rental rate r Imagine that the capital is being rented from its owner. Then the rent you would pay the owner = r. Not all capital needs to be rented: the firm may own its capital. But in perfect competition this “user cost” of capital = the rental rate. So it is always okay to use the rental rate r as the price of capital.
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e firm’s expenditure The firm s expenditure The firm wants to produce output at the lowest expenditure possible. Costs are incurred because inputs must be compensated. Price of labour = wage rate w. rice of capital = rental rate r. Price of capital rental rate r. So, the firm’s expenditure C=wL+rK hat equation from consumer theory is this similar to? What equation from consumer theory is this similar to?
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9_CostsinLR - Read the book! COSTS IN THE LONG RUN Pindyck,...

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