The decision rule for maximizing profits for joint products is:
A) produce where the sum of marginal revenues for both products is equal to the total marginal costs
B) produce where the sum of marginal revenues for both products is greater than the total marginal costs
C) produce where the sum of marginal revenues for both products is less than the total marginal costs
D) produce where the sum of marginal revenues for both products is equal to the total marginal costs provided that the marginal revenue of neither joint product is negative
E) produce where the sum of marginal revenues for both products is equal to the total marginal costs provided that the marginal revenue of both joint products is not negative

Question

Quizplus · Accepted Answer

The decision rule for maximizing profits for joint products is to produce where the sum of marginal revenues for both products is equal to the total marginal costs. However, this rule only applies provided that the marginal revenue of neither joint product is negative. This is because producing a product with negative marginal revenue would result in a loss, which would decrease overall profitability. Therefore, the best choice is D, which takes into account both the need to balance marginal revenues and marginal costs and the importance of avoiding negative marginal revenues.

The Decision Rule for Maximizing Profits for Joint Products Is