A firm has two factories, for which costs are given by: Factory #I: C1(Q1) = 10Q1^2 Factory #2: C2(Q2) = 20Q2^2 The firm faces the following demand curve: P =700 5Q where Q is total output, i.e., Q = Q1+ Q2. a. On a diagram, draw the marginal cost curves for the two factories, the average and marginal revenue curves, and the total marginal cost curve (i.e., the marginal cost of producing Q = Q1 + Q2:). Indicate the profit-maximizing output for each factory, total output, and price. b. Calculate the values of Qi, Q2, Q, and P that maximize profit. c. Suppose labor costs increase in Factory #I but not in Factory #2. How should the firm adjust (i.e., raise, lower, or leave unchanged): Output in Factory #1? Output in Factory #2? Total output? Price?
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