Question: Solve 7. A multiproduct firm's cost function was recently estimated as (LO7) C(Q1, 22) = 90- 0.5 01 02 + 0.4 07 + 0.303 a.

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7. A multiproduct firm's cost function was recently estimated as (LO7) C(Q1, 22) = 90- 0.5 01 02 + 0.4 07 + 0.303 a. Are there economies of scope in producing 10 units of product 1 and 10 units of product 2? b. Are there cost complementarities in producing products 1 and 2? c. Suppose the division selling product 2 is floundering and another company has made an offer to buy the exclusive rights to produce product 2. How would the sale of the rights to produce product 2 change the firm's marginal cost of producing product 1? 8. Explain the difference between fixed costs, sunk costs, and variable costs. Provide an example that illustrates that these costs are, in general, different. (LO4)

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