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 $6 the firm should ________.
A) produce 50 units in plant A and 60 units in plant B
B) produce 60 units in both plants
C) produce 110 units in plant B since MC ATC when the price is $6
D) produce 50 units in both plants

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 $6 the firm should ________.
A) produce 50 units in plant A and 60 units in plant B 
B) produce 60 units in both plants 
C) produce 110 units in plant B since MC > ATC when the price is $6 
D) produce 50 units in both plants

Quizplus · Accepted Answer

At a market price of $6, the firm should produce at a level where the marginal cost (MC) equals the market price in each plant to maximize profit. In Plant A, MC equals $6 at 50 units, and in Plant B, MC equals $6 at 60 units, making option A the correct choice.

A Firm Owns Two Production Plants