Question
(25 Points) 4. Suppose a firm's multiproduct cost function is C(Q, Q) = 65 - 0.5Q1Q2 +0.30 + 0.402, and management wishes to produce
(25 Points) 4. Suppose a firm's multiproduct cost function is C(Q, Q) = 65 - 0.5Q1Q2 +0.30 + 0.402, and management wishes to produce 12 units of each product (Q = Q = 12 units). (a) Determine the marginal cost of each product at the planned levels of production. Clearly show your steps and calculations. (b) Clearly show your steps and calculate the total cost of producing Q1 and Q2 jointly at one plant and the total cost of producing Q1 and Q2 separately at two independent plants at the planned levels of production. What is the economic relevance of this analysis? Explain. (c) Clearly show your steps and estimate the impact of an increase in the production of one product on the marginal cost of the other product at the planned production level. What is the economic relevance of this analysis? Explain.
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