Economics 2150A/B Lecture Notes - Isocost, Sunk Costs, Isoquant

• School: Western University
• Department: Economics
• Course: Economics 2150A/B
• Professor: Prof

Document Summary

6 discussed the shape of a firm"s isoquants just as ch. 3 discussed the shape of a consumer"s preferences. 7 will add a output constraint (just as ch. 4 added a budget constraint), and the firm will choose a level of inputs given input prices and the production constraint to minimize the costs of producing a fixed amount of output. Self-checkouts, atm machines, computerized phone directories, etc. replaced many low-skilled workers in the last 20 years. The economist estimated that one transaction handled through a self-checkout kiosk cost 1/10th as much as a transaction handled by an employee. Firm chooses k and l to minimize tc= wl+rk subject to a target level of output qo. r= cost of capital; w = wage rate. A firm chooses inputs (k,l) to minimize the costs of producing a fixed level of output q. Short-run (some inputs are fixed)- usually k fixed and l variable.