Determine profit-maximizing amount of electricity to produce

Determine profit-maximizing amount of electricity to produce

Macroeconomics

The second largest public utility in the nation is the sole provider of electricity in 32 counties of southern Florida. To meet the monthly demand for electricity in these counties, which is given by the inverse demand function P = 1000 – 5Q, the utility company has set up two electric generating facilities: Q1 kilo-watts are produced at facility 1, and Q2 kilo-watts are produced at facility 2 (so Q = Q1 + Q2). The costs of producing electricity at each facility are given by C1(Q1) = 10,050 + 5Q1^2 and C2(Q2) = 5,000 + 2Q2^2, respectively. Determine the profit-maximizing amounts of electricity to produce at the two facilities, the optimal price, and the utility company’s profits.

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