Question
A monopolist has two plants 1 and 2, producing identical products with total cost functions TC1(q) = / q^2 and TC2(q) = q^2 , respectively.
A monopolist has two plants 1 and 2, producing identical products with total cost functions TC1(q) = / q^2 and TC2(q) = q^2 , respectively. It faces a market demand Q = 120 - 2p.
(a) Derive the monopolist's multiplant marginal cost function (the overall marginal cost curve for the two plants combined).
(b) What is the optimal quantity monopolist chooses to produce at each of the plants, and what is the optimal price?
(c) Calculate the net profits for the monopoly, the CS and the DWL. (HINT: Remember that when there is no fixed cost, the area under the MC curve is the firm's total cost)
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