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A monopolist produces the same product in two factories, A and B. Total costs are as follows: , 2A A A Q Q C +
A monopolist produces the same product in two factories, A and B. Total costs are as follows:
, 2A A A Q Q C + =
, 2B B B Q 5.1Q 6C +=
where Q represents the quantity of the product. The total quantity is . The inverse demand function for the product is B A T Q Q Q + =
. T Q 256 P =
What level of output should the monopolist produce in each factory in order to maximize profits? Prove that the solution you have found is actually a local maximum.
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