To reduce shipping distances between the manufacturing facilities and a major consumer, a Korean computer brand, Intel Corp. intends to start production of a new controlling chip for Pentium III microprocessors at their two Asian plants. The cost of producing x1 chips at Chiangmai (Thailand) is C = 0.002x? + 4x1 + 500, and the cost of producing x2 chips at Kuala-Lumpur (Malaysia) is C2 = 0.005x3 + 4x2 + 275 . The Korean computer manufacturer buys them for RM150 per chip. b) i) Find the quantity that should be produced at each Asian location to maximize the profit. ii) Using the second order condition (SOC), prove that the profit is at the maximum.

To reduce shipping distances between the manufacturing facilities and a major consumer, a Korean computer brand, Intel Corp. intends to start production of a new controlling chip for Pentium III microprocessors at their two Asian plants. The cost of producing x1 chips at Chiangmai (Thailand) is C = 0.002x? + 4x1 + 500, and the cost of producing x2 chips at Kuala-Lumpur (Malaysia) is C2 = 0.005x3 + 4x2 + 275 . The Korean computer manufacturer buys them for RM150 per chip. b) i) Find the quantity that should be produced at each Asian location to maximize the profit. ii) Using the second order condition (SOC), prove that the profit is at the maximum.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter9: Applications Of Cost Theory

Section: Chapter Questions

Problem 1.2CE

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