A Firm Produces Two Products, R and S, and the Production

question 22

Essay

A firm produces two products, r and s, and the production process is such that one unit of r is always obtained with one unit of s. The demand curves for r and s are estimated to be:
Q_r = 75 - P_r
Q_s = 100 - .5P_s
and the marginal cost of production is MC = 75 + 4Q_j, where Q_j consists of one unit of each product.
a. How much of product r and product s should the firm sell to maximize profits?
b. At what price should these products sell?

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Definitions:

Ski Slope

A graded and usually groomed path down a mountainside for snow skiing, snowboarding, or other mountain sports.

Moral Hazard

The risk that a party to a transaction has not entered into the contract in good faith, or has an incentive to take unusual risks in a desperate attempt to earn a return before the contract settles.

Contract Changes

Amendments or modifications to the terms and conditions of an existing agreement.

Behavior Cost

The non-financial costs associated with actions or decisions, including effort, time, and opportunity costs that impact individuals' or companies' behaviors.