Derive the profit-maximizing quantity of sulfuric acid

Assignment Help Business Economics

Reference no: EM133636548

Question

In Ohio there are two manufacturers of sulfuric acid: Chemtrade and Marsulex. The marginal cost of Chemtrade is given by MC = 2Q and the marginal cost curve of Marsulex is represented by MC =Q , where Q and Q are the daily quantities of sulfuric acid in tons produced by Chemtrade and Marsulex, respectively. The world market for sulfuric acid is perfectly competitive, and the world price for sulfuric acid is $250 per ton.

a. Derive the profit-maximizing quantity of sulfuric acid produced by the two firms in one day and the total amount of sulfuric acid that is produced daily in Ohio.

b. Graph your answer to a. by putting the marginal costs of the two firms in the same graph. Be sure to label the axes and all relevant numerical values. As a by-product of their production process, Chemtrade and Marsulex produce sulfur dioxide, which poses a danger to children and the elderly. The marginal external cost of sulfuric acid production is estimated to be constant at MEC =50 for each firm.

c. Without performing any calculation or using any graph, explain why the quantities that you found in a. are not optimal from a society's perspective. Do Chemtrade and Marsulex produce too little or too much sulfuric acid? Why?

Reference no: EM133636548

Questions Cloud

How ethical systems model create high integrity work culture : How does the promise of AI potentially intersect with these issues? How does the Ethical Systems Model create a high integrity work culture? Why or why not?

What facts are in sallys favor of canceling the order : What facts are in Sally's favor of canceling the order? List them supported by the facts and the applicable statutory sections.

Evaluate price elasticity of demand : Identify apple's iphone and evaluate its price elasticity of demand.

Cost-based pricing limit marketer creativity : Why should price be a reflection of value, not the firm's costs? In what way does cost-based pricing limit the marketer's creativity?

Derive the profit-maximizing quantity of sulfuric acid : Derive the profit-maximizing quantity of sulfuric acid produced by the two firms in one day and the total amount of sulfuric acid that is produced daily in Ohio

Market for sulfuric acid is perfectly competitive : The world market for sulfuric acid is perfectly competitive, and the world price for sulfuric acid is $250 per ton.

Leadership in operational and discovery analytics projects : Write a report and deliver a presentation addressing and comparing both projects set up using the criteria outlined - Reflect upon the similarities

Explain the implications of these differing cost structures : Explain the implications of these differing cost structures of each medical group in terms of contracting with managed care organizations.

What are unadjusted odds of having angina pectoris : What are the unadjusted odds of having angina pectoris for those with a family income

User Account

All Pages