ECON-200 Lecture Notes - Lecture 16: Quadratic Function, Cubic Function, Production Function

• School: Diablo Valley College
• Department: Economics
• Course: ECON-200
• Professor: Sorce

Document Summary

Cost function cost function - relates cost to output level for future prediction. Vc = bq linear function, implies constant marginal cost. Vc = bq + gq2: quadratic function, implies linear marginal cost. Vc = bq + gq2 + dq3: cubic function, implies quadratic (u-shaped) marginal cost. Cobb-douglas cost/production function - when production in form q = akalb. C(q) = wl(q) + rk(q: use production function and mrts to find l and k functions in terms of q. Q: no need to use lagrangian method. Substitute l and k functions back into the initial cost function to get final outcome. Workers/managers can become better adapted to their jobs, more experienced, more efficient >> long-term average cost can decrease learning curve describes relation between output and amount of inputs needed for each output. Economies of scale moves along the average cost curve, learning curve shifts the average cost curve downwards.