For this problem I was given the Fixed Cost, Marginal cost, and demand curves for two firms (x and y). So far, from this information I derived the profit (π) function for each firm.



Normally, when maximizing profit, we would use LaGrange. However, the λ constraint was something like cost or budget.

My second guess is to simply take the first partial derivative of each to maximize, but I dont think that will account for the fact that each profit function is dependent on outcome of the other.

Can someone point me in the right direction?

(apologies for format)

  • 1
    $\begingroup$ So It looks like my 2nd guess was correct. Taking the partial of each maintains the dependent variables. $\endgroup$ – Ocasta Eshu Apr 25 '11 at 1:45

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Browse other questions tagged or ask your own question.