Consider a monoplist that sells two products 1 and 2. The cost of producing qi units...

 

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Consider a monoplist that sells two products 1 and 2. The cost of producing qi units of product i is Ci(qi), where C₁ (9₁) = 51 and C₂ (92) = 22. The inverse demand functions (prices) are and P₁ (91, 92) = 1 P2 (91, 92) = 2 - 91 2 92 2 + + 92 91 00 (1) Discuss whether these two products are substitutes or complements. (2) Derive the optimal (q1, 92) that maximizes the monopolist's profit. What are the profit level and resulting prices under (q1, 92)? (3) How much does the monopolist earn on product 1? (4) Compute the monopoly price if the monopolist sells only the second prod- uct (910). Compare the optimal price and output level with those obtained for product 2 in (2). Discuss the effect of introducing product 1. Consider a monoplist that sells two products 1 and 2. The cost of producing qi units of product i is Ci(qi), where C₁ (9₁) = 51 and C₂ (92) = 22. The inverse demand functions (prices) are and P₁ (91, 92) = 1 P2 (91, 92) = 2 - 91 2 92 2 + + 92 91 00 (1) Discuss whether these two products are substitutes or complements. (2) Derive the optimal (q1, 92) that maximizes the monopolist's profit. What are the profit level and resulting prices under (q1, 92)? (3) How much does the monopolist earn on product 1? (4) Compute the monopoly price if the monopolist sells only the second prod- uct (910). Compare the optimal price and output level with those obtained for product 2 in (2). Discuss the effect of introducing product 1.

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1 These two products are complements When the quantity of one product increases it increases the dem... View the full answer