12) Illustrate in Figure 1 the firm's profit when its divisions are allowed to buy and sell in the external market. 13) Illustrate in Figure 2 the firm's profit when its divisions are allowed to buy and sell in the external market.

ENGR.ECONOMIC ANALYSIS
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Author:NEWNAN
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Chapter1: Making Economics Decisions
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Questions 12 and 13
Firms and markets often co-exist. By interacting in a market, a firm can increase its profit compared
to only conducting internal transactions. Figure 1. provided in the answer booklet, illustrates the
situation for a firm with two divisions. The firm's upstream division incurs a marginal cost MCy
when producing some good that can be used as an input by the downstream division. The upstream
division can also sell its production in an external market. The firm's downstream division has a
marginal revenue MR, when selling to end-consumers. This downstream division can purchase its
input requirement from the upstream division and suppliers in the external market. The market
price is P.
12) Illustrate in Figure I the firm's profit when its divisions are allowed to buy and sell in the
external market.
13) Illustrate in Figure 2 the firm's profit when its divisions are allowed to buy and sell in the
external market.
Question 12
Question 13
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Transcribed Image Text:Questions 12 and 13 Firms and markets often co-exist. By interacting in a market, a firm can increase its profit compared to only conducting internal transactions. Figure 1. provided in the answer booklet, illustrates the situation for a firm with two divisions. The firm's upstream division incurs a marginal cost MCy when producing some good that can be used as an input by the downstream division. The upstream division can also sell its production in an external market. The firm's downstream division has a marginal revenue MR, when selling to end-consumers. This downstream division can purchase its input requirement from the upstream division and suppliers in the external market. The market price is P. 12) Illustrate in Figure I the firm's profit when its divisions are allowed to buy and sell in the external market. 13) Illustrate in Figure 2 the firm's profit when its divisions are allowed to buy and sell in the external market. Question 12 Question 13 Figure I Figure 2 Quantity Quantity VA Shape Canvas Layout Edit Background
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