Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 7CACQ
a)
To determine
To find:The economies of scope.
b)
To determine
To find:The cost complementarities.
c)
To determine
To find:The change in marginal cost of producing product .
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A multiproduct firm’s cost function was recently estimated as
C( Q1,Q2 ) = 90 − 0.5 Q1 Q2 + 0.4Q21+ 0.3Q22
a. Are there economies of scope in producing 10 units of product 1 and 10 units of product 2? b. Are there cost complementarities in producing products 1 and 2? c. Suppose the division selling product 2 is floundering and another company has made an offer to buy the exclusive rights to produce product 2. How would the sale of the rights to produce product 2 change the firm’s marginal cost of producing product 1?
A multi product firm's cost function was recently estimated as
C(Q1Q2)=90-0.5Q1Q2 + 0.4Q21 + 0.3Q22
1. are there economies of scope in producing 10 units of product 1 and 10units of product 2?
2. Are there cost complimentarites in producing product 1 and 2?
3. Suppose the division selling product 2 is floundering and another company has made an offer to buy the exclusive rights to produce product 2 change the firm's marginal cost of producing product 1?
The total cost equation for a firm producing two products is
TC(Q1, Q2) = 25 + Q12 + 4Q22 + 5Q1Q2
(a) Do cost complementarities exist for this firm?
(b) Under what circumstances do economies of scope exist for this firm?
(c) Suppose that Q1 = Q2 = 3. Do cost complementarities exist?
(d) Suppose that the firm is currently producing 5 units of Q1, and 10 units of Q2, What is the firm's total cost of production?
e) Suppose that the firm divests itself of the division selling Q1 to a competitor. How much will it cost the firm to continue producing 10 units of Q2? What is the total cost of producing both Q1 and Q2 if the firm producing Q1 produces 5 units?
Chapter 5 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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