Purchase Solution

Two production plants with cost functions

Not what you're looking for?

Ask Custom Question

A monopoly has two production plants with cost functions C1 = 50 + 0.1 Q12 and C2 = 30 + 0.05 Q22. The demand it faces is Q=500 - 10P. What is the profit maximizing level of output?

a. Q1 = 62.5; Q2 = 125
b. Q1 = 125; Q2 = 62.5
c. Q1 = Q2 = 125
d. Q1 = Q2 = 62.5

Purchase this Solution

Solution Summary

The solution answers the question(s) below.

Solution Preview

First of all, I'm assuming from your question that the cost functions have the quantity produced squared rather than multiplied by 2. When you wrote 50 + 0.1 Q12, I'm assuming this means 50 + 0.1 Q1^2 (where ^ means 'to the power of').

In order to find the answer, we must set up the monopolist's problem. It has to choose Q1 and Q2 (the output of each plant) such that its profits are maximized. We already know its ...

Purchase this Solution


Free BrainMass Quizzes
Pricing Strategies

Discussion about various pricing techniques of profit-seeking firms.

Economic Issues and Concepts

This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.

Elementary Microeconomics

This quiz reviews the basic concept of supply and demand analysis.

Economics, Basic Concepts, Demand-Supply-Equilibrium

The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.

Basics of Economics

Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.