CHAPTER 7 THE COST OF PRODUCTION
... , or L = 4K. L 120 Substitute for L in the production function and solve where K yields an output of 1,000 units: 1,000 = (100)(K)(4K), or K = 1.58. Because L equals 4K this means L equals 6.32. With these levels of the two inputs, total cost is: TC = wL + rK, or TC = (30)(6.32) + (120)(1.58) = $379 ...
... , or L = 4K. L 120 Substitute for L in the production function and solve where K yields an output of 1,000 units: 1,000 = (100)(K)(4K), or K = 1.58. Because L equals 4K this means L equals 6.32. With these levels of the two inputs, total cost is: TC = wL + rK, or TC = (30)(6.32) + (120)(1.58) = $379 ...
Profit maximization and supply curve of a competitive firm
... Economies of scale might arise, for instance, because modern assembly-line production requires a large number of workers, each specializing in a particular task. Diseconomies of scale might arise, for instance, because it is difficult for firm managers to oversee a large organization. ...
... Economies of scale might arise, for instance, because modern assembly-line production requires a large number of workers, each specializing in a particular task. Diseconomies of scale might arise, for instance, because it is difficult for firm managers to oversee a large organization. ...
Random Variables and Expectation
... associates changes in net wealth with changes in net “happiness,” and you will want to choose the policy that maximizes your expected utility. [For example, if my utility from a positive financial reward of $w is the square-root of w (one particular utility function over positive gains), then I’m in ...
... associates changes in net wealth with changes in net “happiness,” and you will want to choose the policy that maximizes your expected utility. [For example, if my utility from a positive financial reward of $w is the square-root of w (one particular utility function over positive gains), then I’m in ...
Example 12.1 Minimizing Costs for a Cobb
... 2. Capital Costs: For accountants capital costs are the historical price of a machine, adjusted for depreciation. Here the economists cost notion is quite different. For economists the cost of machine is the implicit value of the machine – that is, economic cost is assessed in terms of alternative u ...
... 2. Capital Costs: For accountants capital costs are the historical price of a machine, adjusted for depreciation. Here the economists cost notion is quite different. For economists the cost of machine is the implicit value of the machine – that is, economic cost is assessed in terms of alternative u ...
Oligopoly File
... of why there tends to be price rigidity in noncollusive oligopoly. There are three reasons: 1. Firms are afraid to raise prices above the current market price, because other firms will not follow, and so they lose trade, sales and ...
... of why there tends to be price rigidity in noncollusive oligopoly. There are three reasons: 1. Firms are afraid to raise prices above the current market price, because other firms will not follow, and so they lose trade, sales and ...
Microeconomics
Microeconomics (from Greek prefix mikro- meaning ""small"") is a branch of economics that studies the behavior of individuals and firms in making decisions regarding the allocation of limited resources. Typically, it applies to markets where goods or services are bought and sold. Microeconomics examines how these decisions and behaviors affect the supply and demand for goods and services, which determines prices, and how prices, in turn, determine the quantity supplied and quantity demanded of goods and services.This is in contrast to macroeconomics, which involves the ""sum total of economic activity, dealing with the issues of growth, inflation, and unemployment."" Microeconomics also deals with the effects of national economic policies (such as changing taxation levels) on the aforementioned aspects of the economy. Particularly in the wake of the Lucas critique, much of modern macroeconomic theory has been built upon 'microfoundations'—i.e. based upon basic assumptions about micro-level behavior.One of the goals of microeconomics is to analyze market mechanisms that establish relative prices amongst goods and services and allocation of limited resources amongst many alternative uses. Microeconomics also analyzes market failure, where markets fail to produce efficient results, and describes the theoretical conditions needed for perfect competition. Significant fields of study in microeconomics include general equilibrium, markets under asymmetric information, choice under uncertainty and economic applications of game theory. Also considered is the elasticity of products within the market system.