Chapter 5: Costs Flashcards
1
Q
Long run
A
all inputs can be adjusted
2
Q
short run
A
not all inputs can be adjusted
3
Q
Long run Cost minimization: cobb douglas
A
4
Q
Long run cost minimization: linear technology
A
5
Q
long run cost minimization: leontief technology
A
6
Q
Long run cost function
A
-similiar to expenditure function
- increasing in y and non-decreasing in p
- linear homogeneous in p
7
Q
Expansion Path
A
- locus of all optimal input combinations for varying output p with constant prices
- can be positve and negative slope
- if production function is homethetic: input proportions are the same for all output levels
-> EP as a ray from origin
8
Q
Long run marginal cost
A
9
Q
Long run average cost
A
10
Q
Elasticity of cost
A
11
Q
Shephards Lemma
A
12
Q
Long run: homotheticity of production function
A
- if production function is homothetic, cost function can be written as C (p,y)=b(p)*a(y)
-> cost is proportional to input
13
Q
short run minimization
A
- compute non-fixed paramenter L
- insert into simple cost function
14
Q
Short term costs
A
