In order to maximize profit, a firm that produces its output in two plants will allocate total output between the two plants so that

Question

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In order to maximize profit, the firm should allocate output between the two plants so that their marginal costs are equal. Since the marginal cost of producing the last unit of output in Taiwan is $8 and the marginal cost of producing the last unit of output in California is only $6, the firm should reduce output in Taiwan and increase output in California until the marginal costs are equal. This will result in a lower total cost of production, thereby increasing profit.

In Order to Maximize Profit, a Firm That Produces Its