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Compute the demand equations also find out the Marginal capacity cost, optimal capacity.

A business faces equal time periods of peak and off-peak demand for its service as given by the following:

P1 = 25 - .02Q1

P2 = 15 - .01Q2

The business faces marginal operation costs of $1.00 per unit. The business also faces a capacity constraint such that it must incur a $2.50 per-unit cost to expand capacity.

Assume that capacity costs are shared by peak and off-peak users. Derive the optimal capacity and prices charged to peak and off-peak users.

Capacity costs are shared by peak and off-peak users

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M918436

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