The total cost equation for a firm producing two products isTC(Q1, Q2) = 25 + Q12 + 4Q22 + 5Q1Q2(a) Do cost complementarities exist for this firm?(b) Under what circumstances do economies of scope exist for this firm?(c) Suppose that Q1 = Q2 = 3. Do cost complementarities exist?(d) Suppose that the firm is currently producing 5 units of Q1, and 10 units of Q2, What is the firm's total cost of production?e) Suppose that the firm divests itself of the division selling Q1 to a competitor. How much will it cost the firm to continue producing 10 units of Q2? What is the total cost of producing both Q1 and Q2 if the firm producing Q1 produces 5 units?

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Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Proudction Costs

Section: Chapter Questions

Problem 8SQP

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The total cost equation for a firm producing two products is

TC(Q₁, Q₂) = 25 + Q₁² + 4Q₂²+ 5Q₁Q₂

(a) Do cost complementarities exist for this firm?

(b) Under what circumstances do economies of scope exist for this firm?

(d) Suppose that the firm is currently producing 5 units of Q₁, and 10 units of Q₂, What is the firm's total cost of production?

e) Suppose that the firm divests itself of the division selling Q₁to a competitor. How much will it cost the firm to continue producing 10 units of Q₂? What is the total cost of producing both Q₁and Q₂ if the firm producing Q₁ produces 5 units?

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