Suppose You Are a Monopolist Operating Two Plants at Different

question 45

Essay

Suppose you are a monopolist operating two plants at different locations. Both plants produce the same product; Q₁ is the quantity produced at plant 1, and Q₂ is the quantity produced at plant 2. You face the following inverse demand function: P = 500 - 2Q, where Q = Q₁ + Q₂. The cost functions for the two plants are a. What are your marginal revenue and marginal cost functions?
b. To maximize profits, how much should you produce at plant 1? At plant 2?
c. What is the price that maximizes profits?
d. What are the maximum profits?

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Definitions:

Domestic Price

The price of goods or services within a particular country, influenced by domestic supply and demand, taxation, and other economic factors.

Exports

Products or services that are manufactured in one nation and purchased by consumers in a different country.

Imports

Items or services that come from foreign countries for the purpose of being sold domestically.

Import-Licensing Requirement

Regulations requiring a company or individual to obtain permission, often through a specific license, before importing goods into a country, used by governments to control the volume and types of goods entering the market.