Consider two firms,A and B,that are producing the same product but with different marginal costs.In this case,

Question

Quizplus · Accepted Answer

The firm with the lower marginal cost is producing at a lower cost than its competitor. As a result, a reallocation of output between the firms, where the firm with the lower cost produces more, can lower the industry's total cost. This is because the industry can produce the same quantity of output at a lower cost by having the more efficient firm produce more.

Consider Two Firms,A and B,that Are Producing the Same Product