ECON 351x Lecture 9: Lecture 9, Ch. 8 continued
Document Summary
You want to find the k* and l* that minimize the cost of producing q = what"s the cheapest way to make that output and how much labor and capital are needed. Cost function = how many units you want to produce and it gives you the cost of. Tc = total economic cost of producing the output. Fx = fixed cost = cost that does not vary with the level output and can only be changed by shutting down. Vc = variable cost = cost that varies as output varies. Accounting cost = actual expenses plus depreciation charges for capital equipment. Economic cost = cost to a firm of utilizing resource (includes economic cost) Opportunity cost = cost associated with opportunities that are forgone when a firm"s resources are not put to their best alternative cost. 2k = l -> i want twice as many labors as capitals, two labors for each capital.
