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Suppose that Desert Farms want to expand its product line with camel milk and other dairy products, upgrading into a multi-product company. Its cost function was recently estimated as: C(Q, Q2) = 75+ (201-Q2)2 a) Are there economies of scope in producing 6 units of product 1 and 6 units of product 2? b) Are there cost complementarities in producing products 1 and 2? Supnore

Suppose that Desert Farms want to expand its product line with camel milk and other dairy products, upgrading into a multi-product company. Its cost function was recently estimated as: C(Q, Q2) = 75+ (201-Q2)2 a) Are there economies of scope in producing 6 units of product 1 and 6 units of product 2? b) Are there cost complementarities in producing products 1 and 2? Supnore

Microeconomic Theory
Microeconomic Theory
12th Edition
ISBN:9781337517942
Author:NICHOLSON
Publisher:NICHOLSON
Chapter2: Mathematics For Microeconomics
Section: Chapter Questions
Problem 2.2P
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Suppose that Desert Farms want to expand its product line with camel milk and other dairy products, upgrading into a multi-product company. Its cost function was recently estimated as: C(Q,, Qz) = 75+ (2Q1- Q2)2 a) Are there economies of scope in producing 6 units of product 1 and 6 units of product 2? b) Are there cost complementarities in producing products 1 and 2? c) Suppose the division selling product 2 is floundering, and another company has made an offer to buy the exclusive rights to produce product 2. How would the sale of the rights to produce product 2 change the firm's marginal cost of producing product 1?
Transcribed Image Text:Suppose that Desert Farms want to expand its product line with camel milk and other dairy products, upgrading into a multi-product company. Its cost function was recently estimated as: C(Q,, Qz) = 75+ (2Q1- Q2)2 a) Are there economies of scope in producing 6 units of product 1 and 6 units of product 2? b) Are there cost complementarities in producing products 1 and 2? c) Suppose the division selling product 2 is floundering, and another company has made an offer to buy the exclusive rights to produce product 2. How would the sale of the rights to produce product 2 change the firm's marginal cost of producing product 1?
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