A small island nation produces only boxes of macaroni and cheese, most of which it sells in the export market. The world price per box is $10, regardless of the quantity exported. The nation has three macaroni and cheese factories, each of which varies in efficiency and each has rising marginal costs. To profit the most as a country, what would this nation do?
A) Produce at each factory until the marginal cost rises to $10.
B) Produce at each factory, but only as long as the marginal cost is well below $10.
C) Produce only at the most efficient factory until the marginal cost is $10.
D) Produce only at the most efficient factory, but only if the marginal cost is well below $10.

Question

Quizplus · Accepted Answer

To maximize profit, the nation should produce at each factory until the marginal cost equals the world price of $10. This ensures that the cost of producing an additional box is equal to the revenue gained from selling it, maximizing profit.

A Small Island Nation Produces Only Boxes of Macaroni and Cheese