Question

1) Company XYZ has a monopoly on a new product. The product can be manufactured in either of two factories. The costs of production for the two factories are C 1 = 5 Q 1 2 and C 2 = 10 Q 2 2. The firm’s demand for the product is P = 500- 4Q.

a. (10) Find the quantity produced by factory 1, the quantity produced by factory 2, the total quantity produced, and the price that maximize profit.

b. (10) There is an increase in the cost of labor in Factory 1 but the cost of labor in Factory 2 remains the same. How will this increase in labor cost affect the quantity produced in Factory 1? the quantity produced in Factory 2? Total output? Price?

Answer 1

@ Criven, where, Q = Q, the P=500-40. CA C₂ = 1002 50, 2 For Multiplant monopoly, IMR= MC = MC 3 foryst plant, for good plants MR = MG. MR = MG & dTR = Me, d TR = МС, do 3500 - 80 = 100 500 - 8(QQ,) = 100 3 500 – 8Q,+Q,) - 2002 500 SQ. = 280 500-80 = 18 Qu LU) solving (5) &th), coegel, 22 22-72. Il. 36 Q, 500 - 4( Qr+ Oly) 500 - 132 2 p* 368 는 I but the of (b). There is an increase in cost of labor in factory cost laboo in factory 2 remains the score - Thus, Increase in cost of labor => increase lor margial cool. Theis, Quantity produced in factory I decrease Quanlity 2 increases.

But Total output decreases & lead to increase in price charged.