Answer to Question #85316 in Microeconomics for Janet

Question

c) Alpha industries sells two products, X and Y, in related markets, with demand functions given by:
Px – 13 + 2X + Y = 0
Py– 13 + X + 2Y = 0
The total cost, in shillings, is given by:
TC = X + Y
Required:
Determine the price and the output for each good, which will maximize profits. (3 marks)

Answer 1

The profit-maximizing condition is: MC=P.

MC=TC’; => MCx=1=Px, MCy=1=Py

1-13+2x+y=0,

1-13+x+2y=0 => y=x