A Monopolist Owns Two Plants in Which to Produce a Product

question 25

Multiple Choice

A monopolist owns two plants in which to produce a product which has inverse demand $P =$ $( 770 / 3 ) - 3 Q$ . The monopolist has marginal cost curves of $M C _ { 1 } = 20 + 3 Q _ { 1 }$ and $M C _ { 2 } = 10 + 6 Q _ { 2 }$ in the two plants, respectively. Which of the following represents the optimal outputs in the two plants, $Q _ { 1 }$ and $Q _ { 2 }$ and the market price?

• A) \(Q _ { 1 } = 170 / 9 ; Q _ { 2 } = 100 / 9 ; P = 500 / 3\).
• B) \(Q _ { 1 } = 100 / 9 ; Q _ { 2 } = 170 / 9 ; P = 500 / 3\).
• C) \(Q _ { 1 } = 500 / 3 ; Q _ { 2 } = 170 / 9 ; P = 100 / 9\).
• D) \(Q _ { 1 } = 500 / 3 ; Q _ { 2 } = 100 / 9 ; P = 170 / 9\).

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Definitions:

Buy Down

A financing technique where points are paid upfront by a borrower to reduce the interest rate on a loan.

Point Purchased

In finance, particularly in mortgage contexts, this refers to prepaid interest that the borrower opts to pay upfront in order to lower the interest rate on the loan.

Monthly Mortgage

A regularly scheduled payment that often includes both interest and principal, made by a borrower to a lender for the repayment of a home loan.

Interest Rate

The percentage rate that is paid by a bank on money that is in some accounts.