2 firms Demand functions: QA = 120 – 2PA + PB Cost Structure: AC = MC = 20 Calculate PA, QA and Profits for firm A.

Consider the following multiple output cost function: C(Q1, Q₂) = 100+ 0.5Q₁Q2 + (Q₁)² + (Q₂)² Suppose Q₁ = Q₂ = 10 units. What is 100 in the above equation? a b FC C VC a Are there economies of scope when Q₁ Q₂ = 10 units? = AFC с Yes b No There are cost complementaries.

(a) Derive the firm's cost function, c(w1,W2, q). (b) Derive the firm's profit, 7(p, w1,W2). A fim uses the Cobb-Douglas production technology q = xªx!, where a and ß are posier are positive = X X, constants. (6) Derive the firm's profit, n(p, w,, w,). Explain.