A firm owns two production plants. The following figures depict the cost curves for each plant. One homogenous good is produced in both plants.

-Refer to the figure above.In the short run,if the market price is $4,the firm should ________.

Question

A firm owns two production plants. The following figures depict the cost curves for each plant. One homogenous good is produced in both plants.
 
-Refer to the figure above.In the short run,if the market price is $4,the firm should ________.

Quizplus · Accepted Answer

In the short run, a firm should continue to produce as long as it can cover its variable costs. The choice to produce 40 units in plant A and 50 units in plant B is based on the marginal cost (MC) curves provided in the figure (which is not visible in this format but is assumed based on the question). The decision to produce these specific quantities suggests that at a price of $4, these quantities are where the MC equals the price in each plant, maximizing the firm's profit or minimizing its losses.

A Firm Owns Two Production Plants