ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP

Eco 204 s ajaz hussain do not distribute since the

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Unformatted text preview: Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. ⏟ Since the firm can be in the short or the long run, there are two versions of the CMP. In this chapter we develop the long run CMP in which the firm chooses the optimal cost minimizing mix of all inputs needed to produce the target output over the production period: ⏟ ( ⏟ ) ⏟ In the next chapter we develop the short run CMP in which the firm (given the inputs are fixed) chooses the optimal cost minimizing mix of variable inputs needed to produce the target output over the production period: ⏟ ( ⏟ ) ⏟ First, let’s get an intuitive feel for the CMP by reviewing the all too familiar two good UMP for a consumer with monotone preferences: ( ) For illustrative purposes consider this Cobb-Douglas UMP: In any UMP, the constraint is the consumer’s income (“budget”) and the objective is to maximize utility: 2 ECO 204 Chapter 12: a Firm’s Cost Minimization Problem (this version 2012-2013) University o...
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This document was uploaded on 01/19/2014.

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