A firm has two factories, for which costs are given by:

Factory 1: C1(Q1) = 10Q2/1

Factory 2: C2(Q2)=20Q2/2

The firm faces the following demand curve: P=700-5Q where Q is total output i.e. Q=Q1+Q2.

a. On a diagram, draw the marginal cost curves for the two factories, the average and marginal revenue curves, and the total marginal cost curve (i.e. the marginal cost of producing Q=Q1+Q2). Indicate the profit-maximizing output for each factory, total output, and price.

b. Calculate the values of Q1, Q2, Q, and P that maximize profit.

c. Suppose that labor costs increase in Factory 1 but not in Factory 2. How should the firm adjust (i.e. raise, lower, or leave unchanged) the following: Output in Factory 1? Output in Factory 2? Total output? Price?

titive Strategy 5 a c. Suppose that the average cost of the last unit pro- ost duced is $15 and the firm's fixed cost is $2000. Find the firm's profit. 8. A firm has two factories, for which costs are given by: Factory #1: C1 (Q1) = 1097 Logonom Factory #2: C2 (Q2) = 2003 The firm faces the following demand curve: P = 700 - 5Q where Q is total output-i.e., Q = Q1 + Q2. a. On a diagram, draw the marginal cost curves for the two factories, the average and marginal rev- enue curves, and the total marginal cost curve (i.e., the marginal cost of producing Q = Q1 + Q2). Indicate the profit-maximizing output for each fac- tory, total output, and price. b. Calculate the values of Q1, Q2, Q, and P that maxi- mize profit. c. Suppose that labor costs increase in Factory 1 but not in Factory 2. How should the firm adjust (i.e., raise, lower, or leave unchanged) the following: nd Output in Factory 1? Output in Factory 2? Total output? Price? be 9. A drug company has a monopoly on a new patented medicine. The product can be made in either of two list plants. The costs of production for the two plants are eti- MC1 = 20 + 201 and MC2 = 10 + 5Q2. The firm's esti- s a mate of demand for the product is P = 20 - 3(Q1 + Q2). How much should the firm plan to produce in each