Cost and supply functions can be formally derived from a given production function.
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Microeconomic literature and textbook principles establish that cost functions and supply schedules can be formally derived from underlying production functions.
Abstract This paper maps where and how much primary biomass from dedicated lignocellulosic crops can be produced under stringent sustainability guardrails, and how unit costs evolve as production scales up. We assemble a harmonized 5 arc minutes global grid of marginal lands screened for food security and environmental constraints, and couple two complementary methods. First, we construct regional and global capacity–cost envelopes by spatially ranking grid cells by farm-gate unit cost and cumulatively aggregating potential. This descriptive step identifies the least-cost clusters and provides transparent orders of magnitude for planning. Second, treating each pixel as a decision unit (exploitation), we estimate parsimonious cubic total-cost functions with region and country effects to recover average(AC) and marginal (MC) cost schedules and the efficient scale Q∗ , thereby deriving micro-founded supply behavior. Results show strong spatial heterogeneity and a systematic divergence between “capacity leaders” and “cost leaders.” Capacity–cost envelopes highlight extensive low-cost clusters in Sub-Saharan Africa, Europe & Central Asia (with concentration in Central Asia), and North America, with additional but smaller clusters in East Asia & Pacific, Latin America & Caribbean, the Middle East & North Africa, and South Asia. Pixel-level econometrics reveals that: (i) in Europe & Central Asia and in Latin America & Caribbean, MC typically remains below AC over wide ranges, indicating persistent economies of scale; (ii) in North America, AC curves are U-shaped with steep MC rises beyond Q∗ , signaling pronounced diseconomies at high output; (iii) in South Asia, most crops exhibit declining AC across the observed range (strong economies), while Miscanthus shows a mild U-shape; (iv) in Sub-Saharan Africa, Miscanthus displays exceptionally flat and low AC at small efficient scales, whereas other crops face early diseconomies; and (v) in East Asia & Pacific, only MC is identified, serving as the regional supply curve. Across regions, Miscanthus and Switchgrass often anchor the lower cost envelope, while Eucalyptus, Poplar, and Willow tend to occupy higher cost segments. Therefore, policy and investment decisions should be sequenced: use capacity–cost envelopes for strategic targeting and portfolio sizing, then rely on pixel-level AC/MC and Q∗ to guide fine-grained siting, contracting, and risk-aware scaling
^{+}}} be the production function, and y ( p ) ≜ f ( x ( p ) ) {\displaystyle y(p)\triangleq f(x(p))} be the net supply. The maximum profit can be written
Hotelling's lemma is a result in microeconomics that relates the supply of a good to the maximum profit of the producer. It was first shown by Harold Hotelling, and is widely used in the theory of the firm.
Specifically, it states: The rate of an increase in maximized profits with respect to a price increase is equal to the net supply of the good. In other words, if the firm makes its choices to m
Hotelling, H. (1932). "Edgeworth's taxation paradox and the nature of demand and supply functions". Journal of Political Economy. 40 (5): 577–616. doi:10.1086/254387. JSTOR 1822600.
Sakai, Y. (1974). "Substitution and Expansion Effects in Production Theory: The Case of Joint Production". Journal of Economic Theory. 9 (3): 255–274. doi:10.1016/0022-0531(74)90051-9.
Takayama, A. (1985). Mathematical Economics. New York: Cambridge University Press. pp. 141–144. ISBN 978-0-521-31498-5.
Varian, H. (1992). Microeconomic Analysis (3rd ed.). New York: W. W Norton. pp. 43–45. ISBN 978-0-393-95735-8.
Cobb-Douglas production function it is equal to 1 C¥= (1 =) { (a, — 19) "2S 32K 22} 1% It can be shown that … extractions (x) from a known body (pool) of underground resource (6). The product sells for a given market price … and design of machines. From a more neoclassical perspective, knowledge can be used either in an embodied
The work develops and investigates a mathematical model for evolution of the technological structure of an economic system where different technologies compete for the common essential resources. The model is represented by a system of consumer-resource rate equations. Consumers are technologies formalized as populations of weakly differentiated firms producing a similar commodity with like average output. Firms are characterized by the Leontief-Liebig production function in stock-flow representation. Firms self-replicate with a rate proportional to production output of the respective technology and dissolve with a constant rate of decay. The resources are supplied to the system from outside and consumed by concerned technologies; the unutilized resource amounts are removed elsewhere. The inverse of a per firm break-even resource availability is proposed to serve as a measure for competitiveness towards a given resource. The necessary conditions for coexistence of different technologies are derived, according to which each contender must be a superior competitor for one specific resource and an inferior competitor for the others. The model yields a version of the principle of competitive exclusion: in a steady state, the number of competing technologies cannot exceed the number of limiting resources. Competitive outcomes (either dominance or coexistence) in the general system of multiple technologies feeding on multiple essential resources are shown to be predictable from knowledge of the resource-dependent consumption and growth rates of each technological population taken alone. The proposed model of exploitative competition with explicit resource dynamics enables more profound insight into the patterns of technological change as opposed to conventional mainstream models of innovation diffusion.
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