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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.
 Fall '13
 AX

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