ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP

Eco 204 s ajaz hussain do not distribute and since see

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Unformatted text preview: s the relationship of optimal inputs and cost with output? What happens to inputs and cost if the firm gets “better” (in the sense that ) What happens to inputs and cost if the price of labor increases? What happens to inputs and cost if the price of capital increases? What is the relationship of cost, average cost and marginal cost with output? In fact, we will ask these questions for all types of CMPs but this is the only time that we’ll do such a detailed analysis. You should make sure that you understand the methods used below. First remember that: { Remember that returns to scale says something about what happens to output when all inputs are scaled up by the same proportion. ● Since , and we see that with increasing returns to scale, input usage and cost have a strictly concave relationship with output; with constant returns to scale inputs and cost have a linear relationship with output; with decreasing returns to scale inputs and cost have a strictly convex relationship with output. For example: 35 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...
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This document was uploaded on 01/19/2014.

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