ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP_PP

Eco 204 s ajaz hussain do not distribute from

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Unformatted text preview: [( ) Now, the cost function is: () () () () () Here: And: The increases with output, concomitant with decreasing returns. In fact, since: This production function indeed has decreasing returns to labor and materials. (c) Will a dollar increase in impact cost more or less or the same as a dollar increase in ? Answer This calls for the envelope theorem: [ If wages increases by a dollar, the impact on optimal cost (subject to constraint) is simply: 69 ECO 204 Chapter 12: Practice Problems & Solutions for The Long Run Cost Minimization Problem in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. () () If the price of materials increases by a dollar, the impact on optimal cost (subject to constraint) is simply: () () In this problem (by coincidence) . Thus the company is impacted equally by a dollar increase in wages versus a dollar increase in price of materials. 70 ECO 204 Chapter 12: Practice Problems & Solutions for The Long Run Cost Minimization Problem in ECO 204 (this version 2012-2013)...
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