Suppose you are a monopolist operating two plants
Suppose you are a monopolist operating two plants at different locations. Both plants produce the same product; Q1 is the quantity produced at plant 1, and Q2 is the quantity produced at plant 2. You face the following inverse demand function: P = 500 – 2Q, where Q = Q1 + Q2. The cost functions for the two plants are
- What are your marginal revenue and marginal cost functions?
- To maximize profits, how much should you produce at plant 1? At plant 2?
- What is the price that maximizes profits?
- What are the maximum profits?