Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
9th Edition
ISBN: 9781259290619
Author: Michael Baye, Jeff Prince
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 7CACQ
a)
To determine
To find:The economies of scope.
b)
To determine
To find:The cost complementarities.
c)
To determine
To find:The change in marginal cost of producing product .
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Sergio Lopez is a publisher of Latin American poetry. His fixed cost is $525, and the cost to produce each individual copy of his book is $3.50. Currently, Sergio is selling these books for $6 each. So far this year, he has produced x
a. Write a linear cost function C for Sergio’s book production, in terms of x.
b. Find the linear revenue function R for selling x copies of the book. Remember that P(x) = (price)x.
c. Use and 1b. to determine the profit function P for selling x books. Write the formula in simplified form.
d.Use your answer for 1c to determine the profit, in dollars, for selling 300 books.
4. A multiproduct firm's cost function was recently estimated as
C(Q₁, Q₂) = 75 -0.25010₂ +0.10+ 0.20²
a. Are there economies of scope in producing 10 units of product 1 and 10 units of product
2?
Are there cost complementarities in producing products 1 and 2?
Suppose that the division selling product 2 is in financial difficulties and that another
company has made an offer to buy the exclusive rights to produce product 2. How would
the sale of the rights to produce 2 change the firm's marginal cost of producing product
1?
b.
c.
An economist estimated that the cost function of a single-product firm is:
C(Q) = 100 + 20Q + 15Q2 + 10Q3
[NOTE à MC(Q) = 20+30Q+30Q2]
Based on this information, determine:
The average fixed cost of producing 10 units of output
The average variable cost of producing 10 units of output
The average total cost of producing 10 units of output
The marginal cost when Q = 10
Chapter 5 Solutions
Managerial Economics & Business Strategy (Mcgraw-hill Series Economics)
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