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
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.
- Fall '14