ajaz_eco_204_2012_2013_chapter_12_Long_Run_CMP_PP

Thus we need to check if start with the foc

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Unformatted text preview: st Minimization Problem in ECO 204 (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. Need to check if This requires that and > 0. Thus case A is impossible. Case B Need to check if Since the KT condition is automatically satisfied. Thus we need to check if () Start with the FOC: () Substitute and : () () Thus, for we need: () () () ( ). This is because the marginal cost of producing Case B is the solution when the price of aluminum is lower than st st the 1 unit is greater than or equal to the price, or the , of the 1 unit. 42 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. Constant Returns Technology $ MC MR P B Thus, anytime qc Qty ( ) the competitive firm’s supply curve is (that’s not the same as the MC curve): Constant Returns Technology $ MC MR P qc Case B when Qty () () Case C 43 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. Need to check if Since the KT condition is automatically satisfied. Thus we need to check if () () Substitute and : () () Thus, for we need: () () Case C will be the solution if the aluminum price, the ( ) -- the marginal cost at full capacity: , is greater than Constant Returns Technology $ MC MR P C qc ( ) the competitive firm’s supply curve is Thus, anytime curve is not the supply curve: Qty . Again notice that the competitive firm’s MC 44 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. Constant Returns Technology $ MC MR P...
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