Answered: The inverse market demand is P=100 –…

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.7P

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3. The inverse market demand is P=100 – 2/3Q. The firms have cost functions TC1 = 15 + 3q1+ q1² TC2 = 20 + q2 + 2q2² Q = q1 +q2

a. Assume there is a multiplant monopoly and TC1 and TC2 represents the cost of production in each plant. How much quantity should each plant produce?

b. Find the market price.

c. Assume there is a multiplant monopoly. Would it make sense for the firm to close one of the plants?

d. Does your answer change if TC2 = 20 + q2 + 2q2² changes to TC2 = 1000 + q2 + 2q² ?

e. Explain your answer from the prior question- did your production change or remain the same?

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