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: [Total Marks = 40 marks] - 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. Q : Use the plot of the zero-profit curve and the marginal cost curve for the two firms using the quantity schedule AND plots of isoprofit curves valuing $ 34,000 and $ 60,000 for the two firms to identify any differences in the shape of the two firms’ isoprofit curves. provide an explanation for any differences that may exist?
Q1: 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: [Total Marks = 40 marks]
- 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.
Q : Use the plot of the zero-profit curve and the marginal cost curve for the two firms using the quantity schedule AND plots of isoprofit curves valuing $ 34,000 and $ 60,000 for the two firms to identify any differences in the shape of the two firms’ isoprofit curves.
provide an explanation for any differences that may exist?
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