ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP

this is illustrated below 8 for simplicity we dont

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

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

Unformatted text preview: ?) This is illustrated below: 8 For simplicity, we don’t discuss changes in the parameters that the inputs must be greater than or equal to a minimum amount (in this example this is zero since 24 ECO 204 Chapter 12: a Firm’s Cost Minimization Problem (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. New iso-cost line Initial iso-cost line 1 Target Output 0 ( ) That is, if the price of input 2 rises, total cost must increase or stay the same (why?) This is illustrated below: Initial iso-cost line New iso-cost line Target Output 0 1 ( A priori, we don’t know the sign of ) ; we know that since . However, one can argue that in fact is attached to an equality constraint that in theory by noting that (think about it). If is always then we must have so that done CMPs for specific production functions): the expression/value for Marginal cost, which cannot be negative Note (come back to this after we have must be identical to the expression 25 ECO 204 Chapter 12: a Firm’s Cost Minimization Problem (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S....
View Full Document

Ask a homework question - tutors are online