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Outline for Monday, July 28
 Remember
   Midterm review today 4:30, 105 Rackley
   Midterm tomorrow
   Read Chapter 7
 Homework 4 questions?
 Review Friday: Technology
 Costs
Technology
 Firms maximize profits π = R(q, p) – C(q, r, w)
 π is profit from producing q when prices are p, r, w
 R is revenue from producing q when the output price is p
 C is cost of producing q when input prices are r and w

 q is the quantity produced
 p is the price of output
 r is rent, the price of capital (K), an input
 w is wage, the price of Labor (L), the other input
Technology
 Firms maximize profits π = R(q, p) – C(q, r, w)
   The revenue function is easy: R = qp
   The cost function is more complicated
     What is the cheapest way to produce q if input prices are r
     and w?
     This depends on the firm’s technology – how they can
     transform inputs into outputs
July28
July28
July28
July28
July28
July28
July28
July28
July28
July28

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July28

  • 1. Outline for Monday, July 28 Remember Midterm review today 4:30, 105 Rackley Midterm tomorrow Read Chapter 7 Homework 4 questions? Review Friday: Technology Costs
  • 2. Technology Firms maximize profits π = R(q, p) – C(q, r, w) π is profit from producing q when prices are p, r, w R is revenue from producing q when the output price is p C is cost of producing q when input prices are r and w q is the quantity produced p is the price of output r is rent, the price of capital (K), an input w is wage, the price of Labor (L), the other input
  • 3. Technology Firms maximize profits π = R(q, p) – C(q, r, w) The revenue function is easy: R = qp The cost function is more complicated What is the cheapest way to produce q if input prices are r and w? This depends on the firm’s technology – how they can transform inputs into outputs