Suppose that a firm can produce its output at either of two plants. If profits are maximized, which of the following statements is true?

Question

Quizplus · Accepted Answer

For a firm to maximize profits, it must allocate its resources in such a way that the marginal cost (MC) of producing an additional unit of output is the same across all its production facilities and equal to the marginal revenue (MR) from selling that unit. This ensures that the firm is not spending more to produce goods in one location than it could in another, and that it is not producing more goods than it can sell at a profit. Therefore, all of the statements A, B, and C are true, making D the correct answer.

Suppose That a Firm Can Produce Its Output at Either