Questions tagged [cost]

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Is the following graph possible?

Is the following graph possible? I've attempted to sketch the TC/TR curves for it but they don't seem to be able to satisfy the following two properties at the same time: 1) Slope of Total Cost (TC) ...
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2answers
2k views

Optimize by MR = MC vs TR = TC

I know that I should optimize production by solving $MR = MC$ with respect to $Q$. But if $TR > TC$, I am making a profit. Why is not enough to just solve $TR = TC$ with respect to $Q$?
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2answers
3k views

What is the difference between marginal cost and average cost? [duplicate]

Marginal Cost is $$MC(y) = \frac{\partial C(y)}{ \partial y}$$ Average Cost is $$AC(y) = \frac{ C(y)}{ y}$$ Average Variable Cost is $$AVC(y) = \frac{VC(y)}{ y}$$ Note: Cost is $$ C(y) = FC + VC(...
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4answers
846 views

Should Costs of Travel to Buy Goods be Regarded as Transaction Costs?

Within the approach of New Institutional Economics associated with Oliver Williamson and others, emphasis is placed on transaction costs as a key factor in explaining why different forms of economic ...
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0answers
480 views

Short Run vs Long Run Cost Functions

Let $z_a$ and $z_b$ are two vectors of inputs. $z_a$ is variable in both long run and short run however $z_b$ is only variable in long run. Now let's suppose that the price of one of the inputs in ...
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0answers
283 views

Curvature of Cost and Production Function

I have been trying to understand the duality theory between cost and production function. Please let me know if my following statement is correct; If the cost function $C(w,q)$ is convex in $q$, the ...
3
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1answer
100 views

Homothetic Production Technologies

Can someone suggest a good resource on homothetic technologies and what properties they imply about cost function, profit function, input demands, output supply etc? Also is it possible to have ...
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0answers
38 views

Total costs as function of labor and quantity [closed]

If I have wage $w = 200$ and rental rate $r = 3050$ on short run, I can assume that $K=1$ and then get the total costs $TC = rK+wL = 3050 + 200L$. Isn't it correct? But what if I also have a cost of ...
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3answers
1k views

Why is the derivative used to represent marginal cost instead of the difference?

Marginal cost is defined as "the change in the total cost that arises when the quantity produced is incremented by one unit." And given a total cost function $C(q)$ that's differentiable, the marginal ...
3
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1answer
9k views

Why does marginal cost (derivative of total cost) differ from variable cost at each level?

Why does the marginal cost equation (as the derivative of total cost equation) make predictions of variable costs that are very different from costs calculated using the Total Cost equation? Marginal ...
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1answer
2k views

How to derive a marginal cost curve [closed]

Provide a mathematical proof for the general result that, given a linear average curve, the corresponding marginal curve must have the same vertical intercept but will be twice as steep as the average ...
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1answer
2k views

What is the economic meaning of a differentiated variable cost function [closed]

Given the total cost function $C(Q)=Q^3-5Q^2+12Q+75$, write out a variable cost function. Find the derivative of the variable cost function and interpret the economic meaning of that derivative. Note:...
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1answer
1k views

Shadow Price vs Marginal Cost

Is there a difference between the two? If so can you intuitively explain it? I see internet resources saying these are equivalent, but I thought I remember someone telling me once shadow price was ...
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1answer
1k views

Estimate total variable cost function (TVC) and average variable cost function (AVP) from marginal cost function (MC)

I need to estimate the function expressions for $TVC$ and $AVC$ from the $MC$ function for different amounts of quantity $(Q)$ From the solutions I have, that For $Q \leq 50$ $MC1(Q) = -Q + 100$ $...
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2answers
1k views

How to derive cubic cost function from a problem of constrained optimization?

The cubic total cost function usually take the form $TC(q)=a+bq+cq^{2}+dq^{3} \qquad a,b,d>0, c<0$ and $c^{2}<4bd$ I know that from a constraint maximization problem $min\quad wL+vK$ ...
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1answer
153 views

Deducing the Total Cost function

$MC = (TC)'(q) = 3q^2 - 40q+220, \quad where \quad 1 \leq q \leq 20 $ The task is to deduce a function of $TC$, if for the production of the first item we need 291 monetary units, and to write out ...
2
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1answer
19k views

How do I calculate quantity to minimize long-run average total cost?

I have a formula for the long-run total cost curve, $$TC(Q) = 6000Q + 40Q^2 + Q^3$$ and I'm trying to find the quantity that minimizes the long-run average total cost. I assume I'm trying to find ...
1
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1answer
57 views

(tax with) costs to first order

1) What does it mean that something (in this context the taxation) has (or doesn't) costs to first order? So, below is an excerpt from Romer's Advanced Macro (p. 598) with such a statement that I've ...
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2answers
34 views

Why do prices of consumer products seem to rise independent of their supply?

For example, in my country, the price of coconuts steadily rises, despite the fact that we still have plenty of coconuts. The same with vegetables. Is this caused primarily by an increase in the cost ...
0
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1answer
83 views

Perfect competition profits question

Market is supplied by: 50 competitive companies all of them have relatively low costs given by an equation $C_l(q)=350+2q+q^2$ and by n companies of higher costs given by an equation $C_h(q)=400+2q+q^...
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2answers
34k views

How to derive firm's cost function from production function?

I recently learned how to solve the following type of problem using the method of Lagrangian multipliers: Given a consumer with utility function $u(x,y)$, wealth $w$, prices $p =(p_x,p_y)$, budget ...

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