2. A monopolist produces its output in two factories, whose cost curves are given by C1 (q1) = 10q and C2 (q2) = 10q3 where qi and q2 are the amounts produced at each factory. The demand for the firm's product is given by P = by the monopolist. (a) On a diagram, illustrate the monopolist's decision about how much to produce at each factory and overall and the price to charge. Briefly explain your diagram. (b) Numerically calculate the monopolist's optimal choices for q1, 42, Q, and P. (c) Suppose that labor costs increase in Factory 1 but not in Factory 2. How should the firm change (i.e. raise, lower, or leave unchanged) each of the values you found in (b)? Your answer should be qualitative, not quantitative. A diagram might be useful but is 700 – 5Q where Q is the total quantity sold not necessary.

2. A monopolist produces its output in two factories, whose cost curves are given by C1 (q1) = 10q and C2 (q2) = 10q3 where qi and q2 are the amounts produced at each factory. The demand for the firm's product is given by P = by the monopolist. (a) On a diagram, illustrate the monopolist's decision about how much to produce at each factory and overall and the price to charge. Briefly explain your diagram. (b) Numerically calculate the monopolist's optimal choices for q1, 42, Q, and P. (c) Suppose that labor costs increase in Factory 1 but not in Factory 2. How should the firm change (i.e. raise, lower, or leave unchanged) each of the values you found in (b)? Your answer should be qualitative, not quantitative. A diagram might be useful but is 700 – 5Q where Q is the total quantity sold not necessary.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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