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Ch 8 Producers in the Long Run

Ch 8 Producers in the Long Run - 23:16* Profitmaximization...

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Producers in the Long Run 23:16 **assuming revenue is constant Profit maximization Equate the marginal product per dollar spent on all factors MP K   = MP L  P       P L If marginal product per dollar is not equal for all factors, there are possibilities that will  reduce costs (for a given level of output) Profit-maximizing firms Must not only be technically efficient (least number of inputs) but also productively  efficient (least cost) Profit Maximization = Cost minimization = Efficiency Relationship b/t Short Run and Long Run Cost Curves LR: minimum cost of producing each level of output (productively efficient), given 1.  Factor prices, and           2. when  all  factors can  vary SR: minimum cost (per unit cost) of producing each level of output,         1. given factor prices, and         2. When at least one variable is  fixed SHAPE OF LRAC  – firm (shifts as industry expands)
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