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    Correct Prices

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    You are the manager of a firm that produces output in two plants. The demand for your firm's product is P = 78 - 15Q, where Q = Q1 + Q2. The marginal cost associated with producing in the two plants are MC1 = 3Q1 and MC2 = 2Q2.

    (1) How much output should be produced in palnt 1 in order to maximize profits?

    (2) What price should be charged to maximize profits?

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    Solution Preview

    For Profit Maximization MR=MC1=MC2.

    First we need to calculate MR. Total Revenue = PQ = R = 78Q - 15Q^2
    Thus Marginal Revenue = MR = 78 - ...

    Solution Summary

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