A Monopoly Has Two Production Plants with Cost Functions C₁

question 55

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 profit-maximizing level of output?

• A) Q₁ = 62.5; Q₂ = 125.
• B) Q₁ = 125; Q₂ = 62.5.
• C) Q₁ = Q₂ = 125.
• D) Q₁ = Q₂ = 62.5.

---

Definitions:

NPV

Net Present Value, a method used in capital budgeting to assess the profitability of an investment or project by calculating the difference between the present value of cash inflows and outflows.

Conventional Capital Budgeting

A process of planning and evaluating large-scale investments and expenditures to optimize a company's capital expenditures and investments.

Forecasting Risk

The potential for a forecast to be inaccurate, which can lead to incorrect business decisions and financial performance assessments.

Sensitivity Analysis

A financial model technique used to determine how different values of an independent variable impact a particular dependent variable under a given set of assumptions.