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Characterising the solution of an average cost minimisation problem with returns to scale measures and a decomposition technique
Date Issued
1992
ISBN
9783790806083
9783642484179
Citation
In Gritzmann, P., Hettich R., Horst R., & Sachs E. (eds.) (1992). Operations Research ’91 (pp. 380-383).
Type
Book Chapter
Abstract
In standard microeconomic theory, the competitive firm operates to minimise average cost in long period equilibrium. Assuming the sufficient conditions for minimisation are satisfied, it is possible to show that the firm’s input demand functions exist, and to describe its responses to parametric changes in the prices of inputs (comparative statics). It has, however, not been possible to obtain definite results for own derivatives: e.g., the change in labour services, when its wage changes.
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