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MicroeconomicsOptimization, Experiments, and Behavior$
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John P. Burkett

Print publication date: 2006

Print ISBN-13: 9780195189629

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195189629.001.0001

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Inputs, Outputs, and Costs

Inputs, Outputs, and Costs

Chapter:
(p.19) 2 Inputs, Outputs, and Costs
Source:
Microeconomics
Author(s):

John P. Burkett

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195189629.003.0002

This chapter examines simple production processes with only two inputs and one output. It describes methods for solving a cost minimization problem or finding the cheapest combination of inputs that produce a given output. This chapter examines simple production processes with only two inputs and one output. It describes methods for solving a cost minimization problem or finding the cheapest combination of inputs that produce a given output. To calculate the cost-minimizing combination of inputs, the isoquant's equation together with a formula equating the marginal rate of substitution (MRS) and the relative price of the input should be on the horizontal axis. If the input qualities obtained are both positive, they constitute an interior solution. However, if one of them is negative then a corner solution is required.

Keywords:   production processes, cost minimization, input/output, isoquants, MRS, interior solution, corner solution

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