This preview shows page 1. Sign up to view the full content.
Unformatted text preview: KT conditions for this general
?): [ ( ) inputs CMP will be (why do we differentiate with respect to
( [ ( ) ( but ) ) ) Marginal product of input 1 and (
in ECO 204, we will always find a solution to this system of equations and in this 2 inputs general CMP we would get
. from which we can compute the optimal cost in terms of parameters as
Now, if we substitute the [⏟ into the Lagrangian equation: [ ( ) Then we get the optimal value of the Lagrangian equation, the “optimized objective of the constrained optimization
problem”, where some terms are going to zero (why?): [⏟ [⏟ ( [ ) ⏟ ⏟ This allows us to establish a few general results about the cost of producing a target output in the long run. 23
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. Suppose that after we solve this CMP some parameter were to chan...
View Full Document
This document was uploaded on 01/19/2014.
- Fall '14