Question: A firm has two factories, for which costs are given by:

The firm faces the following demand curve:

where \(Q\) is total output-i.e., \(Q=Q_{1}+Q_{2}\).

1. On a diagram, draw the marginal cost curves for the two factories, the average and marginal revenue curves, and the total marginal cost curve (i.e., the marginal cost of producing \(Q=Q_{1}+Q_{2}\) ). Indicate the profit-maximizing output for each factory, total output, and price.
2. Calculate the values of \(Q_{1} ; Q_{2}, Q\), and \(P\) that maximize profit.
3. Suppose that labor costs increase in Factory 1 but not in Factory 2. How should the firm adjust (i.e., raise, lower, or leave unchanged) the following: Output in Factory 1 ? Output in Factory 2 ? Total output? Price?

Price: $2.99

Solution: The downloadable solution consists of 3 pages
Deliverable: Word Document