A multi- plant firm has three plants. At its current production levels, the marginal cost of production is $2 at plant 1, $2.25 at plant 2, and $2.10 at plant 3. The firm's overall marginal cost of production is______

Question

Quizplus · Accepted Answer

To find the overall marginal cost of production of the firm, we need to calculate the weighted average of the marginal costs of each plant. The weight of each plant is its share in the total production.

Let's assume that the total production of the firm is 100 units, and each plant produces 1/3 of the total production, i.e., 33.33 units. Then, the total cost of producing 100 units would be:

Plant 1: 33.33 * $2 = $66.66
Plant 2: 33.33 * $2.25 = $74.99
Plant 3: 33.33 * $2.10 = $69.99

The weighted average marginal cost of production would be:

($66.66 + $74.99 + $69.99) / 100 = $6.35

Therefore, the best answer is B) $6.35.

A Multi- Plant Firm Has Three Plants