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Production process exhibit cost complementarities

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Reference no: EM131457277

Consider a firm that produces two products. The firm's cost function is:

C(Q1, Q2 )-Q1 Q2 +4Q21 + 2Q22, Where Q1 is the output of the first product, and Q2 output of the second product

a) Assume the firm produces the products separately. Calculate the total cost of producing: Q1 = 10 and Q2 = 5.

b) Now assume the firm produces both products together. Calculate the total cost of producing: Q1 = 10 and Q2 = 5.

c) Does this firm exhibit economies of scope? How do you know?

d) The marginal cost of producing Q1 is: MC1 =  -Q2 + 4Q1, while the marginal cost of producing Q2 is: MC2 = -Q1 + 6Q2. Does this firm's production process exhibit cost complementarities? How do you know?

Reference no: EM131457277

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