You Are the Manager of a Firm That Produces Output

question 135

Multiple Choice

You are the manager of a firm that produces output in two plants.The demand for your firm's product is P = 120 − 6Q,where Q = Q₁ + Q₂.The marginal costs associated with producing in the two plants are MC₁ = 2Q₁ and MC₂ = 4Q₂.What price should be charged to maximize profits?

• A) 60
• B) 66
• C) 70
• D) 76

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Definitions:

Weak Axiom

A principle used in consumer choice theory that stipulates if a consumer chooses bundle A over bundle B when both are affordable, then the consumer should not choose B over A when prices change, holding income constant.

Risk Inconsistency

The phenomenon where an individual's tolerance for risk changes in unpredictable ways over time or across different contexts.

Expected Loss

The anticipated amount of loss a business might suffer due to various risk factors.

Risk Aversion

A preference for certainty over uncertainty, where an individual prefers outcomes with lower risk and potentially lower returns.