Answered: cost functions

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Q2: Firms A and B are two firms supplying products in two separate differentiated goods markets. Equations (1) and (2) give the total cost functions of the two firms:

- Firm A: TC = 2Q -----------------------------(1)

- Firm B TC = 10 + 2Q -------------------------(2)

Each firm has the ability to produce a maximum quantity of 80,000 units in ten batches of 8,000.

a) Use the information given about firms A and B and appropriate diagrams/figures to explain how the equilibrium for both firms will change if a rival company increases its prices.

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