Two medical laboratories (lab 1 and lab 2) join forces to develop a new antibiotic. Each laboratory must decide how many researchers to assign to the joint project. The more researchers they assign to this project, the faster they will be able to develop and supply the new medicine. But, at the same time, other projects will be left on stand-by as they reallocate their staff to the joint project. Laboratory 1 has slightly more expertise in the science that is required for the antibiotic. This is captured assuming that each scientist it assigns to the project can contribute slightly more than those assigned by laboratory 2. Specifically, estimations show that when lab 1 assigns r, researchers and lab 2 assigns r2 researchers to the project, it leads to an overall revenue worth €X which is given by X = 120(2r, + r2). Estimations also show that laboratory i faces a cost from having to leave some projects on stand-by which is given by 3(ri)².

Two medical laboratories (lab 1 and lab 2) join forces to develop a new antibiotic. Each laboratory must decide how many researchers to assign to the joint project. The more researchers they assign to this project, the faster they will be able to develop and supply the new medicine. But, at the same time, other projects will be left on stand-by as they reallocate their staff to the joint project. Laboratory 1 has slightly more expertise in the science that is required for the antibiotic. This is captured assuming that each scientist it assigns to the project can contribute slightly more than those assigned by laboratory 2. Specifically, estimations show that when lab 1 assigns r, researchers and lab 2 assigns r2 researchers to the project, it leads to an overall revenue worth €X which is given by X = 120(2r, + r2). Estimations also show that laboratory i faces a cost from having to leave some projects on stand-by which is given by 3(ri)².

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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