Assignment No 2 solution will be opened on **Feb 3, 2016** and due date of assignment submission will be **Feb 9, 2016**.

PROBLEM # 1: Maximize Profit (π) = 14X + 9Y Subject to the following constraints: 4X + 2Y + SA = 30 1X + 1Y + SB = 20 3Y + SC = 31 The corner points are given as:

## Assignment 2 Solution

**From all this information, algebraically solve the linear programming problem while finding the profit (Rs.) level at each point. Also indicate profit maximizing corner point.**

**PROBLEM # 2**: The Water and Power Development Authority (WAPDA) has recently published the following estimates of demand and supply relations for electricity:

QD = 70,000 – 20,000

P QS = 30,000P

## Assignment 2 Solution

**a) Calculate the perfectly competitive industry equilibrium price/output combination.**

**b) Assume that the industry output is organized into a cartel. Calculate the industry price/output combination that will maximize profits for cartel members. (Note: As a cartel, industry MR=P=3.5 – 0.0001Q and MC=P=0.00003Q)**

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## Fall 2015_ECO404_2