one input and derive the short-run cost function. Show that long-run average and marginal cost are constant and equal. Show that for every level of the fixed inpu average cost and long-run average cost are equal at the minimum level of short- cost. Illustrate your results in the cost-output plane.

one input and derive the short-run cost function. Show that long-run average and marginal cost are constant and equal. Show that for every level of the fixed inpu average cost and long-run average cost are equal at the minimum level of short- cost. Illustrate your results in the cost-output plane.

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: The Cost Of Production

Section: Chapter Questions

Problem 5CQQ

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Concept explainers

Cost of Production

The entire idea of the cost of production or production cost is applied corresponding, or we can say that it is related to monetary cost. Money cost refers to any money expenditure which the firm or supplier, or producer undertakes in purchasing or hiring factor of production or factor services.

Question

100%

1. Derive the cost function for the two-input, constant-returns, Cobb-Douglas technology. Fix
one input and derive the short-run cost function. Show that long-run average and long-run
marginal cost are constant and equal. Show that for every level of the fixed input, short-run
average cost and long-run average cost are equal at the minimum level of short-run average
cost. Illustrate your results in the cost-output plane.

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