A monopolist has two plants. In plant , the total cost function is , and in plant , the total cost function is , where represents the quantity of good produced. The demand faced by the monopolist is , where . How does the monopolist allocate its total production to serve the market?
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A monopolist has two plants. In plant 1, the total cost function is c₁(q₁)=2q₁, and in plant 2, the total cost function is c₂(q₂)=q₂²/2, where q represents the quantity of good produced. The demand faced by the monopolist is p=10-q, where q=q₁+q₂. How does the monopolist allocate its total production to serve the market? (A) q₁=6 and q₂=2 (B) q₁=2 and q₂=2 (C) q₁=4 and q₂=4 (D) q₁=4 and q₂=10/3
Also written as: A monopolist has two plants. In plant 1, the total cost function is c_1(q_1)=2q_1, and in plant 2, the total cost function is c_2(q_2)=q_2^2/2, where q represents the quantity of good produced. The demand faced by the monopolist is p=10-q, where q=q_1+q_2. How does the monopolist allocate its total production to serve the market?
Monopoly and price discrimination has come up 128 times in 7 exams since 2004.
This question is on Multi-plant and multi-product monopoly, part of Monopoly and price discrimination in Microeconomics.
How a monopolist allocates output across plants, markets or products.
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Question from the DSE 2006 paper. Solutions are TestStop's own. Not affiliated with or endorsed by any examination authority.