Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
A monopolist sells its product in two di§erent countries. The demand in country 1 is Q1 = 50-0.5P1, whereas the demand in country 2 is Q2 = 25-0.25P2. The firm's cost function is C(Q)=10+0.5Q2, where Q = Q1 + Q2.
a) Calculate the amount of the product that the profit maximizing monopolist should sell in each country. Q1*=?, Q2*=?
b) The determinantal test suggests that the firm's profit function (which one is correct)
|
is locally concave around the critical point, but not elsewhere |
|
is globally concave |
|
is locally convex around the critical point, but not elsewhere |
|
is globally convex |
|
has a saddle point at the critical point |
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