In order to maximize profit,a firm that sells its output in two markets will allocate total output between the two markets so that:
A)marginal revenue is equal in the two markets
B)marginal revenue for the firm is equal to the sum of the marginal revenues
C)marginal revenue for the firm is equal to the sum of the marginal costs
D)both a and b
E)none of the above

Question

Quizplus · Accepted Answer

In order to maximize profit, the firm should allocate total output between the two markets so that marginal revenue is equal in the two markets. This is because if one market has a higher marginal revenue than the other, the firm should produce more in that market until the marginal revenue is equalized. If the firm produces beyond the point where marginal revenue is equal in both markets, it will incur losses. Therefore, allocating output between the two markets so that marginal revenue is equal is the best choice to maximize profit.

In Order to Maximize Profit,a Firm That Sells Its Output