A Monopoly Has Two Production Plants with Cost Functions C₁

question 20

Multiple Choice

A monopoly has two production plants with cost functions C₁ = 50 + 0.1Q₁² and C₂ = 30 + 0.05Q₂².The demand it faces is Q = 500 − 10P.What is the condition for profit maximization?

• A) MC₁(Q₁) = MC₂(Q₂) = P(Q₁ + Q₂).
• B) MC₁(Q₁) = MC₂(Q₂) = MR(Q₁ + Q₂).
• C) MC₁(Q₁ + Q₂) = MC₂(Q₁ + Q₂) = P (Q₁ + Q₂).
• D) MC₁(Q₁ + Q₂) = MC₂(Q₁ + Q₂) = MR (Q₁ + Q₂).

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Definitions:

Value Chain

The series of steps a company takes to add value to its product or service, from raw materials to the final customer.

Supply Chain

A network of organizations, people, activities, information, and resources involved in the production and delivery of a product or service from supplier to customer.

Core Element

An essential part or component that is central to the function or structure of something.

Product Development Strategy

A business strategy focusing on developing new products or improving existing ones to meet market demand or create new markets.