A firm is producing a joint product, Product A and Product B, with variable proportions. At its current production levels, the marginal benefit of producing Product A is $10 and the marginal cost is $8 and the marginal benefit of producing Product B is $2 and the marginal cost is $6. To maximize profits, the managers of the firm should produce ______of Product A and ______of Product B.

Question

Quizplus · Accepted Answer

The firm should produce more of Product A and less of Product B because the marginal benefit of producing Product A is higher than the marginal benefit of producing Product B. Additionally, the marginal cost of producing Product A is lower than the marginal cost of producing Product B, further supporting the decision to produce more of Product A. In this case, the firm is not only maximizing profits, but also optimizing its production process by choosing the most efficient and cost-effective combination of the two products.

A Firm Is Producing a Joint Product, Product a and Product