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    maximum profits

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    A monopolist with two plants operates with a marginal revenue of 500-4Q and marginal costs of 4Q for plant 1 and 2Q for plant 2.

    What are outputs at each plant to maximize profits?

    What price maximizes profits?

    What are maximum profits?

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    Solution Preview

    part a)
    Let plant 1 produces q1 and plant 2 produces q2
    For profit maximization MC=MR or MR=MC1=MC2
    Equating MR=MC1, we get 500-4q1-4q2=4q1 or we can say 2q1+q2=125 eq--1

    Equating MR=MC2, we get 500-4q1-4q2=2q2 or we can say ...

    Solution Summary

    This solution determines maximum profits.