5. Suppose a company has a monopoly on a game called Monopoly and faces a demand

Question

5. Suppose a company has a monopoly on a game called Monopoly and faces a demand curve given by QT = 100??P and a marginal revenue function given by MR = 100 ?? 2QT where QT equals the combined total number of games produced per hour in the company?s two factories (QT = q1 + q2). If factory 1 has a marginal cost function given by MC1 = q1 ?? 5 and factory 2 has a marginal cost function given by MC2 = 0:5q2 ?? 5, how much total output will the company choose to produce and how will it distribute this production between its two factories in order to maximize pro?ts?

Explanation / Answer

for q1 MR1=100-2q1-2q2 MC1=q1-5 MR1=MC1 3q1+2q2=105 similarly for commodity2 MC2=.5q2-5=100-2q1-2q2 2q1+2.5q2=105 q1=15 q2=30 Qt=45

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