A firm that faces a downward sloping demand has two factories. The total cost of production in Factory 1 and in Factory 2 are given respectively by TC(41) = 10q1 +2q7 and TC2(42) - 1042 + q, where q; is the quantity of output produced in Factory i, i = 1, 2. The demand curve for the firm's output is given by P = 510 – q, where q = 41 + 42 and p is the price. a) Derive the firm's marginal cost of production as a function of q. b) What is the firm's optimal output level? How many units of output does it produce in each factory? c) How much does it charge per unit of output?
A firm that faces a downward sloping demand has two factories. The total cost of production in Factory 1 and in Factory 2 are given respectively by TC(41) = 10q1 +2q7 and TC2(42) - 1042 + q, where q; is the quantity of output produced in Factory i, i = 1, 2. The demand curve for the firm's output is given by P = 510 – q, where q = 41 + 42 and p is the price. a) Derive the firm's marginal cost of production as a function of q. b) What is the firm's optimal output level? How many units of output does it produce in each factory? c) How much does it charge per unit of output?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Part a b c
Transcribed Image Text:Question 4.
A firm that faces a downward sloping demand has two factories. The total cost of production
in Factory 1 and in Factory 2 are given respectively by TC:(41) = 10q1 +2qỉ and TC2(42) =
10q2 + 3, where q; is the quantity of output produced in Factory i, i = 1,2. The demand
curve for the firm's output is given by P = 510 – q, where q = q1 + 92 and p is the price.
a) Derive the firm's marginal cost of production as a function of q.
b) What is the firm's optimal output level? How many units of output does it produce in
each factory?
c) How much does it charge per unit of output?
Assume now that the firm incurs a per unit cost of 20 for shipping output from Factory 1
to the market.
d) What is the firm's new optimal output level? How many units of output does it produce
in each factory?
e) How much does it charge per unit of output?
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