Questions tagged [cost-functions]
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6 questions
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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) ...
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Cost Minimization and Karush-Kuhn-Tucker
A firm produces an output $y$ using two inputs $x_1$ and $x_2$, where the production function is given by $y = \sqrt{x_1 x_2}$ for any $(x_1, x_2) \in \mathbb{R}^2_+$. Union agreements obligate the ...
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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 ...
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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 ...
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Where does the short-run and long-run costs intersect if $k$ is fixed?
Suppose the short-run cost function is written as $SC(\bar{w}, \bar{r}, y, k)$ and the long-run cost function as $C(\bar{w},\bar{r},y)$ where the rates $w$ and $r$ are fixed. $y$ determines the ...
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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 ...
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