1. Consider the following cost functions for a multiproduct fimm: C(X,Y)= 100+X+2Y C(X,0) = 100+ X CO, Y) - 100+ 2Y a. D

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1 Consider The Following Cost Functions For A Multiproduct Fimm C X Y 100 X 2y C X 0 100 X Co Y 100 2y A D 1 (38.92 KiB) Viewed 32 times

1. Consider the following cost functions for a multiproduct fimm: C(X,Y)= 100+X+2Y C(X,0) = 100+ X CO, Y) - 100+ 2Y a. Do these relationships imply economies of scope in the production of X and Y? b. Does cither X or Y production exhibit product-specific scale economics? c. Now consider that fimm produces only X and that the inverse market demand for X is P-201-20X. How many firms will there be in this market? What type of a firm is this? d. What will be the profit maximizing output of this firm? e. What price would it charge? f. How much would the profits be? g. Is this an (economically) efficient outcome? Why or why not? h. What is the efficient price (1.0, perfectly competitive price?) i. If the govemment regulates this firm to charge the efficient price, what would be its profits? Would the fimm stay in the market? j. Now assume that the government is ready to go for the second best. That is any price which is equal to average cost as long as the market demand is met. How much would the firm produce? What would the price be?