HW chap 9

# Mc gr a w hillc omhmtpx todo pr intvie w 414 11514

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Unformatted text preview: s to \$150? Instructions: Round your answers to 1 decimal place. 50 0 benches. chairs. Worksheet Section: Supply by Multiproduct Price­Taking Firms Noah and Naomi can produce garden benches, garden chairs or both; they are price takers in both markets. Their cost function for garden benches is and the marginal cost is Their cost function for garden chairs is and the marginal cost is The price of a garden bench, PB, is \$120. The price of a garden chair, PC, is \$90. a. What are Noah and Naomi's profit­maximizing sales quantities of benches and chairs? Instructions: Round your answers to 1 decimal place. 35 benches. 0 chairs. b. What is the profit­maximizing quantities if the price of benches increases to \$150? Instructions: Round your answers to 1 decimal place. 50 benches. 0 chairs. e z to.mhe c loud.mc gr a w- hill.c om/hm.tpx? todo= pr intvie w 4/14 1/15/14 Assignme nt Pr int Vie w Explanation: To find the profit­maximizing sales quantities and prices for two products, we need to extend the quantity and shut­down rules. The new quantity rule says to find the most profitable pair of positive sales quantities at which price equals marginal cost for both products. The new shut­down rule compares the profit from those quantities to three alternatives: (a) shutting down the first product while continuing to sell the second; (b) shutting down the second product while continuing to sell the first; and (c) shutting down both products. First, find the profit­maximizing sales quantities when Noah and Naomi produce both benches and chairs by setting marginal cost equal to price and solving for the optimal quantities for both products. Setting the marginal cost of producing benches equal to the price of benches: MCB = PB 50 + 2QB + QC = 120 2QB = 70 – QC QB = 35 – 0.5QC. (1) Similarly,...
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## This note was uploaded on 01/22/2014 for the course ECO 3352 taught by Professor Ax during the Fall '13 term at Troy.

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