Consider two firms,A and B,that are producing the same product but with different marginal costs.In this case,
A)a reallocation of output between the firms can lower the industry's total cost.
B)neither firm is producing its output at the lowest attainable cost.
C)some resources must be unemployed.
D)each firm is being wasteful.
E)one firm is not maximizing profits.

Question

Quizplus · Accepted Answer

If one firm has lower marginal cost than the other, it can produce more output at a lower cost than the other. Therefore, a reallocation of output between the firms in a way that the firm with lower marginal cost produces more will result in a lower total cost for the industry.

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