Suppose that a firm produces two outputs. The firm's profit-maximizing output levels (yĩ, 42) satisfy the following two equations. Pi – 2ciyi + c2y2 = 0, P2 + C3yi – 202y2 = 0, where p1, P2 > 0 are the corresponding prices of output 1 and 2 and c1,c2, C3 > 0 are the firm's cost parameters. (So yi, 45 are the endogenous variables and the rest are exogenous parameters.) Compute and A (that is, evaluate the effects of an increase in pı on the profit-maximizing output levels).
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