Questions tagged [cost-functions]

The tag has no usage guidance.

Filter by
Sorted by
Tagged with
12
votes
6answers
3k views

Why are cost functions often assumed to be convex in microeconomics?

Why are cost functions typically assumed to be convex in producer theory of (introductory) microeconomics? For me this goes against the intuition of economies of scale. There are fixed costs (FC) ...
4
votes
1answer
5k views

Deriving long-run cost function

I'm a bit unsure about how to derive a long-run cost function. Suppose my production function was $X(L, K)=L^a K^b$, where $a+b>1$. I'm thinking about doing the following, but I'm not sure it's ...
2
votes
1answer
3k views

Supply curve when the marginal cost is zero

The supply curve is built as the average marginal cost (MC), when the MC is equal or higher than the average cost (AC) The marginal cost increases, as a result of the opposite effect of marginal ...
0
votes
1answer
44 views

Production function involving profit maximisation

​Hi, I don't get how the answer of d is deduced in this question because I don't think I made any mistakes in my calculation and have also used all the information given. After knowing L is 800, I ...