A monopoly has two production plants with cost functions C₁ = 40 + 0.2 Q₁² and C₂ = 50 + 0.1 Q₂².The demand it faces is Q = 480 − 5P.What is the profit-maximizing level of output? A) Q₁ = 50; Q₂ = 100 B) Q₁ = 60; Q₂ = 120. C) Q₁ = Q₂ = 75 D) Q₁ = Q₂ = 100

Question

Quizplus · Accepted Answer

To maximize profit, the firm should equate marginal costs (MC) across plants and set them equal to marginal revenue (MR). Solving the equations derived from the cost functions and demand curve, the optimal outputs are Q1 = 60 and Q2 = 120.

A Monopoly Has Two Production Plants with Cost Functions C1

A Monopoly Has Two Production Plants with Cost Functions C₁