Refer to the following:

A firm with two factories, one in Michigan and one in Texas, has decided that it should produce a total of 500 units of output in order to maximize profit. The firm is currently producing 200 units in the Michigan factory and 300 units in the Texas factory.

At this allocation between plants, the last unit of output produced in Michigan added $5 to total cost, while the last unit of output produced in Texas added $3 to total cost.

-In order to maximize profit, a firm that total output between the two plants so that produces its output in two plants will allocate

Question

Refer to the following:

A firm with two factories, one in Michigan and one in Texas, has decided that it should produce a total of 500 units of output in order to maximize profit.  The firm is currently producing 200 units in the Michigan factory and 300 units in the Texas factory.

At this allocation between plants, the last unit of output produced in Michigan added $5 to total cost, while the last unit of output produced in Texas added $3 to total cost.

-In order to maximize profit, a firm that total output between the two plants so that produces its output in two plants will allocate

Quizplus · Accepted Answer

Marginal cost is the additional cost of producing one more unit of output. In order to maximize profit, a firm will allocate its output between plants so that the marginal cost is equal for the two plants. This is because if the marginal cost is higher in one plant than in the other, the firm can increase its profit by shifting production to the plant with the lower marginal cost.

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