ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP

Its long run cmp is note that labor and

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Unformatted text preview: inputs for production because: If because for it must be that If 10 Drop the constraint Drop the constraint because for it must be that . . Note to self: confirm that the source for this is Learning by Doing Rates, Journal of Industrial Economics (2011) 31 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. As such, the long run Cobb-Douglas CMP becomes: { } { } [ Where by the envelope theorem we know that: ( ( ( ) ) ) i.e. as the cost of production will go up (or stay the same) i.e. as the cost of production will go up by the amount of initial labor i.e. as the cost of production will go up by the amount of initial capital Be careful, unlike consumer theory where we could simplify a Cobb-Douglas UMP into a log-linear Cobb-Douglas UMP by applying positive monotonic transformation, we cannot do the same for the Cobb-Douglas CMP. The FOCS are11: [⏟ [⏟ [ Notice that and given that it implies that equating the expressions yields: 11 Marg...
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This document was uploaded on 01/19/2014.

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