Solution-Company owns another plant that your predecessor

Company owns another plant that your predecessor

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Reference no: EM131757382

Let us suppose that you are the chief investment officer, as well as VP for Production, for the ABC Monopoly. You face the inverse demand function Pd=70-Q which you expect to be stable over the next several years. You have two plants at your disposal but are currently only using #1 which has a marginal cost function of MC1= Q (This suggests that your total costs are TC1=Q²/2).

How much Q will you produce, what will its price be, and what are your profits?
Your company owns another plant that your predecessor, for whatever reason, did not use. The marginal cost for that plant is MC2=10 + 2Q (with TC2=10Q+Q²) Would you use this plant? Explain and illustrate..
Suppose a third plant becomes available as a rental. You have to pay the production costs of the new plant plus a rental fee of $300 a year. The MC for this plant is MC=4. Would you rent it? Why or why not?

Reference no: EM131757382

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Company owns another plant that your predecessor

Reference no: EM131757382

Reference no: EM131757382

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