Question
A firm produces its first 30 units at a cost of$ 10 per unit. It's next 20 units costs $15 per unit. All additional units
A firm produces its first 30 units at a cost of$ 10 per unit. It's next 20 units costs $15 per unit. All additional units cost $20 per unit. There are no fixed costs of production, so the marginal cost is equal to the average (opportunity) cost. The firm can sell up to 40 units at a price of PA = $12 in market A, and up to 20 units at p8 = $17 in market B. Nothing will be demanded at higher respective prices, and the same amount will be demand in each market at lower respective prices. Finally, assume that the firm's costs only depend upon the total amount of output produced across both markets and that consumers cannot transport goods across market boundaries. How much should the firm produce in each market?
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