A firm produces two products (A and B) jointly. Every time a unit of A is produced, a unit of B is also produced as a byproduct. At the current level of output, the marginal revenue from sales of A is $35 and from sales of B is $12. The marginal cost of producing a unit of A is $35, so the firm should
A) continue producing the current level of output.
B) increase its rate of production.
C) reduce its rate of production.
D) This question cannot be answered without additional information.

Question

Quizplus · Accepted Answer

The firm should increase its rate of production because the marginal revenue from product B ($12) is greater than the marginal cost of producing product A ($35), which means the total marginal revenue ($35 + $12 = $47) exceeds the marginal cost ($35).

A Firm Produces Two Products (A and B) Jointly