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1. A two-product firm faces the two inverse demand functions and the .pdf

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A firm produces two products with inverse demand functions P1=Q2Q1+a and P2=Q12Q2b. The cost function is C=Q12+2Q22+10. The profit function is Π= (Q2Q1+a)Q1 + (Q12Q2b)Q2 - (Q12+2Q22+10). The profit function has a maximum because it is continuous and differentiable. dadQ1 is negative and dadQ2 is positive, showing an increase in a decreases Q1 and increases Q2.

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1. A two-product firm faces the two inverse demand functions and the cost function below: i) P1=Q2Q1+a ii) P2=Q12Q2b iii) C=Q12+2Q22+10 (Note: p's represent prices, Q's represent outputs, a and b are positive parameters.) a) Write down the profit function. b) Does the profit function have a maximum? How do you know? c) Find the comparative-static derivatives dadQ1 and dadQ2, and evaluate their signs.

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1. A two-product firm faces the two inverse demand functions and the .pdf

  • 1. 1. A two-product firm faces the two inverse demand functions and the cost function below: i) P1=Q2Q1+a ii) P2=Q12Q2b iii) C=Q12+2Q22+10 (Note: p's represent prices, Q's represent outputs, a and b are positive parameters.) a) Write down the profit function. b) Does the profit function have a maximum? How do you know? c) Find the comparative-static derivatives dadQ1 and dadQ2, and evaluate their signs.