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What is the profit maximization rule for a two-plant monopolist? MC1(Q1) = MC2(Q2) = P(Q1 +...

What is the profit maximization rule for a two-plant monopolist?

MC1(Q1) = MC2(Q2) = P(Q1 + Q2).

MC1((Q1) = MC2(Q2) = MR(Q1 + Q2).

MC1(Q1 + Q2) = MC2(Q1 + Q2) = P(Q1 + Q2).

MC1(Q1) = MC2(Q2) = MR1(Q1) + MR2(Q2).

please help/explain! thank you

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Answer #1

Ans. MC(Q1) = MC(Q2) = MR(Q1 + Q2)

In a two plant monopoly the production function is divided into two production plants, each of them having its own cost structure. Different cost structures give rise to different marginal costs and hence each individual production plant will try to maximize their individual production output following the maximisation principle. The marginal revenue for the two firms is the same and hence equating the maximizing conditions we get the above condition.

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