A firm is producing two goods (X and Y) that are related in consumption. The dem

Question

A firm is producing two goods (X and Y) that are related in consumption. The demand function for X is: Which of the following pairs of goods might the fim be producing? Select one: a. newspapers and tennis balls O b. shampoo and conditioner c, cola and caffeine-free coke O d. bran cereal and sugar-frosted corn flakes In order to maximize proft, a firm like the one above, which is producing two goods that are related in consumption, should choose the level's of output at which Select one a total marginal revenue equals total marpinal cost b total marginal revenue equais the marginal cost of each good. the marginal revenue of each good ecquals total marginal cost d marginalrevente squais margnalcost for each good sinullaneou

Explanation / Answer

1- now here we can see that the cross price elasticity is negative as can be seen from the equation, and cross price elasticity is negative in case the goods are complements,

here the complement goods are shampoo and conditioner

2- now as here we can see that the goods produced are complements, so in order to maximize the profits the marginal revenue of the goods are put equal to the marginal cost of each good simultaneously,

so answer is D

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