# Tag Info

Accepted

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

There are several reasons: Didactic Reasons: Other users seem to have missed it but in your question you specify you are talking about "(introductory) microeconomics" [emphasis mine]. Well ...
• 57.7k
Accepted

### Fixed cost of a firm

It is the first one, $TC(0) = FC$. This is the definition. Also consider that it is not clear what is "transformed by $q$ in some way". In case of $$\frac{5q}{q+1} + \frac{5}{q+1}$$ are the two ...
• 29.6k
Accepted

### Cost Minimization and Karush-Kuhn-Tucker

The term $\lambda_2(x_1-1)$ in your Lagrangian is incorrect; it treats the second constraint as an equality rather than an inequality. To allow for the constraint being an inequality you can include a ...
• 8,584

### CobbDouglas: Constant marginal costs and constant returns to scale

Since the exponents add to one the production function has constant returns to scale, which means that, given factor prices, total cost is linear, which means that it's derivative (= marginal cost) is ...

### Long Term Economic Profit for Perfectly Competitive market

To elaborate a bit on the answer by user 1muflon1, in economics the word "profit" is the surplus accrued to the firm after we have subtracted from revenues all compensation of production ...
• 33.9k

• 33.9k
Accepted

### Trigonometric Cost Function

There is a long tradition of using flexible functional forms for cost, utility or production functions. This can be done using a (low) order series expansion. Usually, these are Taylor expansions. For ...
• 12.5k

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

Theoretically, the cost function is a result of a cost minimization problem with a given production technology. Convex/linear/concave costs are a result of decreasing/constant/increasing returns to ...
• 5,291

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

If the cost function is globally concave in output $y$, then the profit function is convex in $y$ and the optimal (profit maximizing) output is not characterized by the equality between price and ...
• 3,481
Accepted

### How to calculate the minimun of Average Fixed Cost knowing the Average Fixed Cost

As the quantity of output of a good increases, fixed cost (by definition) remains the same and therefore average fixed cost per unit of output continuously decreases. Therefore the average fixed cost ...
• 8,584

### What does "r" represent in the total cost function?

r is the user cost of capital. User cost refers to the expenses borne by the owner or renter of a capital asset resulting from the use of the asset for a given period of time. A standard metaphor is ...
• 3,798

### what results can be derived from the average cost curve?

Short answer: whether a firm's maximum 'profit' at the point where marginal revenue equals marginal cost is positive or negative depends on whether average revenue exceeds average cost at that point. ...
• 8,584
Accepted

### what results can be derived from the average cost curve?

Assuming a firm is a perfect competitor in input markets, the long-run average cost curve, which traces out the minimums of short-run average cost curves, can be used to characterize economies and ...
• 1,249

### Why min AC = min SRAC at the minima of AC curve?

Short-run implies that some decision variable cannot be free set, it is fixed for a time (in the short-run). In the long-run all variables may be freely set. Let us denote the fixed variable by $x$. ...
• 29.6k

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

Increasing and convex costs are a result of decreasing returns to scale. These are mainly due to the limited availability of (local) input factors. Other contributing factors are the decline of ...
• 7,119