New answers tagged cost-functions
8
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 contant. If you change the exponent 1-alpha to beta where alpha+beta < 1, there will be decreasing returns to scale (but still homotheticity) and you will ...
5
If you are interested in the case where $\rho \geq 1$ then look at the post CES
$\ \ \rho \geq 1$. For the standard case where $0 < \rho < 1$ you should get a result like this
$$C(w_1,w_2,y) = \left(w_1^{\frac{\rho}{\rho -1}} +w_2^{\frac{\rho}{\rho -1}}\right)^{\frac{\rho - 1}{\rho}} y.$$
To see this you should start by setting up the cost ...
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