Alright when we deal with our ice a cost and it's a quant lines together, we can find the cost minimizing point where we can make a level of production for the lowest cost? Let's check it out. So the optimal combination of inputs, it reflects the lowest cost to produce a given amount of units. Right? So let's say we want to make 1000 cookies. Well we want to make those 1000 cookies at the lowest possible cost. So we have a certain level of production which will find on our ice a quant curve and then we'll have our costs shown on our cost curve for different levels of inputs. How much that would cost us? Well, if we put those together, we can find the cost minimizing point and that cost minimizing point. It's where an ice A quant curve is tangent to the ice a cost line. So what's that tangent mean? That means they touch at just one point. So tangent means Touch at just one point. Okay, that is what their their tangent at that point. Okay, so let's go ahead and see this as an example. It's actually pretty easy to do this when we when we do it in an example, spooky cookies, bakes cookies with two inputs, ovens and baker's ovens cost 6000 per month. And bakers cost 3000 per month. Quant curves are shown for two levels of production. 5,070 500 cookies. What is spooky is cost, minimizing combination of labor and capital for 5000 cookies. So notice they didn't label any of the curves? They didn't label R. O kwon our costs. So which one's which? Well we know that the so quant curves are the ones that are curved like this. Right? The ice a quant curves are curved like this because what do they show us? They show us different levels of inputs that lead to the same amount of output. Okay, So this and which one's gonna be? Which these are two is a quant right? This one these these right here the blue ones are ri so quant curves. Right? So which one is which which one is for 5000? And which one is for 7500? They told us they showed us too. So which one do you think is gonna be 5,070 500? Well the one further away has to be the higher production, right? Because we're gonna need more inputs to make more production. So right here has to be the 5000 cookies And this one has to be our 7500 cookies. Okay so what does this tell us? We don't need that outer one. Right. We're only concerned with the 5000 cookie line because we want a production of 5000 cookies. Maybe we did this whole analysis and found that our profit maximizing point is that 5000 cookies. So let's go ahead and find out how do we minimize the cost to maximize the profits. So like I said, what we need to do is we need to find the cost curve that is tangent to the ice a quant curve. So at any point that that this is a quant curve. This blue curve at the point that it just touches a budget line that is going to be our cost minimizing point. So it's very clear where that is and it's going to be this point right here, right? That's the only point where they're just touching for for a moment, even though they're they're on top of each other for a little bit. That's the exact point right? Where they're they're touching on top of each other. So that is the cost minimizing point To produce 5000 cookies. Notice this point right here is not going to be cost minimizing why? Because we're on a further ice a cost line. Those yellow lines are the cost lines. So as we move further from the origin, right? As we discussed in ice, a cost lines. That's a bigger budget. So a nice accost line that's further from the origin has a higher budget. Now, what about this line right here, this is a lower budget than that one. But notice that that that line down there, that cost line cannot produce 5000. There's no point on this line on this lower line down here that can produce 5000 cookies because it never touches our ice. A quant line. Right? The Issaquah online shows us different combinations that can produce 5000 cookies. Well, if we can't touch it with that is a cost line, then that that's not enough money to produce 5000 cookies. So our answer is right here At this point where we produce with four bakers and two ovens, so four bakers and two ovens Is our cost minimizing point. So that is the combination of inputs that we should use to produce. 5000 cookies. Cool. Alright, let's go ahead and pause here and then we'll discuss one more topic related to this.

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Differences in Cost Minimizing Point

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So let's extend this idea to comparative advantages in different countries. So different countries might have different costs for the different inputs. We might say that in the U. S. A. We might have a lot of capital and the capital, like the ovens, it might be cheap to get capital but the cost of labor to hire someone might be a lot more compared to china where maybe getting ovens might be expensive and hiring more people is relatively cheaper. Right? Uh This is just an example but the idea is uh that different countries are going to have different costs for for the capital and the labor. So they'll have different cost minimizing points. So notice what's happening here in the U. S. A. We can afford more ovens and over here in china they can afford more bakers. Right? So it gives us different cost curves. The S. A cost curves are different because the prices of the different inputs is different. That leads to different uh cost minimizing points. So in our example here we would have for this level of production in the usa maybe we would uh the cost minimizing point would be four ovens and two bakers, right? Just like we see here four ovens and two bakers where for the same level of production in a different economy? Well, there's might be over here where they have two ovens and four bakers, right, For the same level of production. Okay, so that could lead to different total costs in the different uh different countries. Cool, that's about it for this discussion, let's go ahead and move on to the next video.