Production Theory – Flashcards
11 test answers
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Marginal Cost, First Order Condition
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MC (y*, w) = p
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Variable Cost
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VC (w,p) = w * f(y)
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AVC
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VC(w,p) / y
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MC
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d VC / y
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AC
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C (w,y) / y = F/y + VC/y
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MC = AC at:
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Minimum of AC, at AC=MC
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Optimal Production in Long Run
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y*(w,p) = 0 if P < P(-) AND y*(w,p) = y*(SR) if P > P(-) where P(-) is intersection of ATC and MC
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