Ch20Cost Minimization(中级微观经济学清华大学,钟笑寒)概要1.ppt

Chapter Twenty Cost Minimization Why We Study Cost Minimization? Our goal is to study the behavior of profit-maximizing firms in both competitive and noncompetitive market environments. It is convenient and even necessary to break up the profit-maximization problem into two pieces. Step 1: How to minimize the costs of producing any given level of output. Step 2: How to choose the most profitable level of output. Cost Minimization A firm is a cost-minimizer if it produces any given output level y 3 0 at smallest possible total cost. c(y) denotes the firm’s smallest possible total cost for producing y units of output. c(y) is the firm’s total cost function. Cost Minimization When the firm faces given input prices w = (w1,w2,…,wn) the total cost function will be written as c(w1,…,wn,y). The Cost-Minimization Problem Consider a firm using two inputs to make one output. The production function is y = f(x1,x2). Take the output level y 3 0 as given. Given the input prices w1 and w2, the cost of an input bundle (x1,x2) is w1x1 + w2x2. The Cost-Minimization Problem For given w1, w2 and y, the firm’s cost-minimization problem is to solve The Cost-Minimization Problem The levels x1*(w1,w2,y) and x1*(w1,w2,y) in the least-costly input bundle are the firm’s conditional demands for inputs 1 and 2. The (smallest possible) total cost for producing y output units is therefore Conditional Input Demands Given w1, w2 and y, how is the least costly input bundle located? And how is the total cost function computed? Iso-cost Lines A curve that contains all of the input bundles that cost the same amount is an iso-cost curve. E.g., given w1 and w2, the $100 iso-cost line has the equation Iso-cost Lines Generally, given w1 and w2, the equation of the $c iso-cost line isi.e. Slope is - w1/w2. Iso-cost Lines The y’-Output Unit Isoquant The Cost-Minimization Problem The Cost-Minimization Problem The Cost-Minimization Problem The Cost-Minimization Problem The Cost-Minimization