Answer to Question #193877 in Economics for Henderson

Question

A monopolistic producer of two goods, 1 and 2, has a joint total cost function

 where  and  denote the quantity of items of goods 1and 2, respectively that are produced. If P1 and P2 denote the corresponding prices then the demand equations are

 Using the Lagrange multiplier approach, find the maximum profit if the firm is contracted to produce a total of 15 goods of either type. Estimate the new optimal profit if the production quota rises by 1 unit.

Answer 1

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