ECONOMICS 100A

1Cost MinimizationChapter 21Learning goals for todayWe ask how to minimize cost for a given quantity that needs to be producedShort-runLong-runUnderstanding isocost linesThe role of returns to scale2Profit Maximization vs.Cost Minimization34The Isocost Line LKTC/rTC/wSlope = -w/r5Isocost Lines Cover the PlaneGraphically: LKTC4TC3TC2TC1TC556The Cost Minimization Problem LKF(L,K)=

7The Cost Minimization ProblemGraphically: LKF(L,K)=

LLRKLR8Conditional Factor Demand Functions LKComparing LR profit max and LR Cost Min9Solution to LR Profit Max

LLR(p,w,r)KLR(p,w,r)Our C-D Example10The C-D LR Profit Max Example11The C-D LR Profit Max Examplecontinued12continued13Average Cost14Returns to Scale: Q1