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 $2 and the marginal cost is $4 and the marginal benefit of producing Product B is $5 and the marginal cost is $3. To maximize profits, the managers of the firm should produce ______of Product A and ______of Product B.
A)more; more
B)more; less
C)less; less
D)less; more

Question

Quizplus · Accepted Answer

To maximize profits, a firm should produce where marginal benefit equals marginal cost. For Product A, the marginal cost exceeds the marginal benefit, suggesting production should decrease. For Product B, the marginal benefit exceeds the marginal cost, suggesting production should increase.

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