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Unformatted text preview: inal product of labor and . Now in the previous chapter we assumed that
exactly as we argued above (where?). In the first two FOCs, isolate and
and Marginal product of capital
32 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. This says: in the long run Cobb-Douglas CMP, at the optimal bundle of inputs, the absolute value of the iso-cost line
slope (LHS) equals the absolute value of the iso-quant curve: Target
Output 0 Now, solving together with yields the demand functions for optimal labor and capital (sometimes known as “factor demands”) giving us the optimal inputs in terms of the target output
technology/management at the firm and the production function parameters: () where: () () [ [ () where: [ [ the price of inputs, state of . Earlier we said that solving a CMP not only gives us the optimal mix of cost minimizing inputs but it also gives us the cost
function, a mathemati...
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This document was uploaded on 01/19/2014.
- Fall '14