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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.