Suppose that you own two farms on which to grow corn. Inorder to lower the cost of production, you determine toincrease production on Farm 1 and reduce it on Farm 2. Thisimplies that the marginal cost of production on Farm 1 is:
A)greater than the marginal cost of production on Farm 2.
B)less than the marginal cost of production on Farm 2.(True Answer )Correct
C)equal to the marginal cost of production on Farm 2.
D)The difference of the marginal costs between the two farms cannot be determined.

Question

Quizplus · Accepted Answer

If the goal is to reduce production on Farm 2 and increase it on Farm 1 to lower the cost of production, then it implies that the marginal cost of production on Farm 2 is higher than that of Farm 1. Therefore, reducing production on Farm 2 would decrease the total cost of production, and increasing production on Farm 1 would result in a lower marginal cost. Hence, the best choice is to reduce production on Farm 2 and increase it on Farm 1.

Suppose That You Own Two Farms on Which to Grow