one input and derive the short-run cost function. Show that long-run average and marginal cost are constant and equal. Show that for every level of the fixed inpu average cost and long-run average cost are equal at the minimum level of short- cost. Illustrate your results in the cost-output plane.

one input and derive the short-run cost function. Show that long-run average and marginal cost are constant and equal. Show that for every level of the fixed inpu average cost and long-run average cost are equal at the minimum level of short- cost. Illustrate your results in the cost-output plane.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Cost of Production

The entire idea of the cost of production or production cost is applied corresponding, or we can say that it is related to monetary cost. Money cost refers to any money expenditure which the firm or supplier, or producer undertakes in purchasing or hiring factor of production or factor services.

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1. Derive the cost function for the two-input, constant-returns, Cobb-Douglas technology. Fix
one input and derive the short-run cost function. Show that long-run average and long-run
marginal cost are constant and equal. Show that for every level of the fixed input, short-run
average cost and long-run average cost are equal at the minimum level of short-run average
cost. Illustrate your results in the cost-output plane.

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