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Microeconomics I partie 5/9

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K. P.

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About these flashcards

This flashcard set covers advanced microeconomics topics at the university level, focusing on concepts like profit maximization, input-output relationships, and production technologies. It delves into the Cobb-Douglas production function, factor proportions, and the distinction between short-run and long-run production. The flashcards also explore the role of technology in production, the behavior of isoprofit lines, and the impact of scale changes. This set is ideal for economics students seeking to understand the intricacies of production theory and cost minimization in various economic scenarios.

Flashcards

Students

Language

English

Category

Macro-Economics

Level

University

Created / Updated

06.06.2019 / 02.10.2023

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Output expansion path

Cost minimization

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Long run profit maximization

Exercise 2: Short-run profit maximization with Cobb-Douglas technology

Comparative statics 2
Suppose the price of output increases: p rises

Downward sloping factor demand: algebra

Comparative statics 1
Suppose the price of factor 1 increases: w augments

Short-run profit maximization: tangency condition

Isoprofit line

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Short-run profit maximization

Fixed factor

Paying even if no production

Example of a quasi-fixed factor

electricity only if producing

Present value's formula

Economic profit

Long run VS short run

Short run: At least one factor of production is fixed
Long run: All factors of production are variable

A well-behaved technology is

I convex: if the input bundles x' and x'' both provide y units of output then the mixture tx' + (1-t)x'' provides at least y units of output, for any 0 < t < 1
I monotonic: more of any input generates more output

Diminishing Technical Rate of Substitution

(marginal) Technical Rate of Substitution (TRS)

Examples of return to scale: Cobb-Douglas

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Difference between marginal product and return to scale

Marginal products describe the change in output level as a single input level changes
Returns-to-scale describes how the output level changes as all input levels change in direct proportion (e.g. all input levels doubled, or halved)