microbook_3e-page98

microbook_3e-page98 - Eric Doviak Principles of...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Eric Doviak Principles of Microeconomics Notes on Isoquants, Isocosts and the Memo on Land Value Taxation In Lecture 6, I used isoquants and isocosts to analyze profit-maximization. This is not strictly correct. The point of tangency between an isoquant and an isocost line illustrates the point where cost is minimized for a given level of output. It is not necessarily the point where a firm maximizes its profit. Obviously, a firm cannot be maximizing its profit unless it’s minimizing cost, but the reverse is not necessarily true. The difference occurs because: x cost minimization – occurs when the firm minimizes the cost of producing a given level of output x profit maximization – occurs when the firm minimizes the cost of producing the level of output which maximizes its profit. ƇƇƇ asset returns – the case of perfect substitutes Imagine that you have the opportunity to buy shares of two equally risky stocks. x
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 12/29/2011 for the course ECO 311 taught by Professor Willis during the Fall '10 term at SUNY Stony Brook.

Ask a homework question - tutors are online