Assume that the cost function for a multiproduct firm is given by �(�1, �2), where �1 is the number of units produced of product 1 and �2 is the number of units produced of product 2. The multiproduct cost function thus defines the cost of producing �1 units of product 1 and �2 units of product 2 assuming all inputs are used efficiently. Suppose that the multiproduct cost function of firm A, which produces the two goods, is given by: �(�1,�2) = 200 + 5�1�2 + 2 (�1)! + 4(�2)! 1. Define in few words economies of scope. Give an example different from the one in the textbook. 2. Under what conditions do economies of scope exist for this firm? 3. Suppose that firm A is currently producing 5 units of product 1 and 10 units of product 2. 3.1 Does the cost function for the multiproduct firm A exhibits economies of scope in this case? 3.2 What is the fixed cost of producing 5 units of product 1 and 10 units of product 2? 3.3 What is the variable cost of producing 5 units of product 1 and 10 units of product 2? 3.4 What is the total cost of producing 5 units of product 1 and 10 units of product 2? 4. Explain in few words when cost complementarities exist. Give an example. 5. Do cost complementarities exist for this firm? Explain your answer. 6. Firm A is considering selling the subsidiary that produces product 2 to firm B, in which case it will produce only product 1. What will happen to firm A’s costs if it continues to produce 5 units of product
ONLY 4 & 5
Assume that the cost function for a multiproduct firm is given by �(�1, �2), where �1...
Problem 05-07 A multiproduct firm's cost function was recently estimated as: C1Q1,Q2) = 90 -0.5Q1Q2 +0.4Q 2 + 0.3Q22 a. Are there economies of scope in producing 10 units of product 1 and 10 units of product 2? You cannot determine if there are economies of scope. Yes - there are economies of scope. No - there are no economies of scope. b. Are there cost complementarities in producing products 1 and 2? You cannot determine if there are cost...
I am really stuck with this please help Thanks.
4. Suppose that a firm produces two different outputs, the quantities of which are repre- sented by yı and y2. In general, the firm's total costs can be represented by C(y1, y2). This function exhibits economies of scope if C(0,42) + C(4,0) > C(y1, y2) for all output levels of either good. 4.1 Explain in words why this mathematical formulation implies that costs will be lower in this multiproduct firm than...
Economies of Scope Suppose the joint total cost function of a telecommuncications company providing internet service, Q1 and TV cable service Q2 is the following: C(Q1Q2) = Q1 + Q2 + (Q1 x Q2)1/3 A) Does this multi-service firm experience economies of scope when it provides internet access to 75 customers, and cable T.V. access to 125 customers? Does this cost equation suggest that the multi-service firm enjoys cost complementarity among its two services? Please clarify and explain throroughly. (Note,...
2 3 and 4
b. What is the average variable cost of producing 2 units of output What is the marginal cost of producing 2 units of output? c. The following table summarizes the short-run production function for your firm. Your product sells for $5 per unit, labor costs $5 per unit, and the rental price of capital is $25 per unit. Complete the following table, and answer the questions below; 2. 1 5 10 5 30 3 5 60...
A firm uses labor (L) and capital (K) as inputs, and has a short run cost function C=15+ 10q+ q2. Capital is fixed at K̅ a. Give the formula for the firm's marginal cost function. Any method of deriving the marginal cost function is acceptable. (Hint: When calculating MC, you can assume that increases by a very, very small amount, so that q2 = q1 + ε ≈ q and q1 + q2 ≈ 2q.) b. Give the formula for the firm's...
A firm has a short run cost function of C=10+2q+q2 with capital fixed at K. What is the firm's average product of labor if it produces 6 units and labor wage is $8 per unit. How many units of labor must be used in the short run if it is currently producing 6 units.
Consider a firm with two technologies to choose between when producing output. The cost function when using technology 1 is given by: C () 3600 65q +36q2 The cost function when using technology 2 is given by: (q)-900 + 900g + q2 can only implement one of the two technologies at a time. Which technology should the firm choose if it wishes to produce 15 units of output? What about 25 units of output? If q 15 units, then the...
A firm produces a product in a competitive industry and has a total cost function (TC) of TC(a) 60+4q+2q2 and a marginal cost function (MC) of MC(q) = 4 + 4q. At the given market price (P) of $20, the firm is producing 4.00 units of output. Is the firm maximizing profit?V What quantity of output should the firm produce in the long run? The firm should produce unit(s) of output. (Enter your response as an integer.)
Questions 10-12 rely on the following prompt: Firm 1 and Firm 2 compete as Cournot duopolists, producing q1 and q2 units of output respectively, such that market output Q=q1+q2. They face market inverse demand of P = 400 − 2Q. Firm 1’s Total cost is given by TC1=2q1^2. Firm 2’s by TC2=2q2^2. 10. What is Firm 1’s equilibrium profit maximizing output level, q1*? 11. What is market output in the Cournot equilibrium for this market (so, what is the value...
10)Consider two firms producing the same good for a common market. Firm 1 has the cost function ofc(q1)=2q1 and firm 2 has the cost function of c(q2)=q2. Assuming they compete as Bertrandduopolists, what price would you expect to prevail? a)1 b)2.5 c)2 d)3 need explain!