In order to maximize profit,a firm producing two goods that are related in consumption should choose the levels of output at which
A)total marginal revenue equals total marginal cost.
B)total marginal revenue equals the marginal cost of each good.
C)the marginal revenue of each good equals total marginal cost.
D)marginal revenue equals marginal cost for each good simultaneously.

Question

Quizplus · Accepted Answer

In order to maximize profit, the firm should produce each good at the output level where its marginal revenue equals its marginal cost. Therefore, the firm should produce both goods at the output levels where their respective marginal revenue equals their respective marginal cost. So, the best choice is when marginal revenue equals marginal cost for each good simultaneously (option D).

In Order to Maximize Profit,a Firm Producing Two Goods That