If a firm has limited production capacity in one part of a sequential production operation, it can maximise profits by producing those items having the highest:

Question

Quizplus · Accepted Answer

Maximizing profits in a situation of limited production capacity involves making the most efficient use of the available resources. When one part of a sequential production operation has limited capacity, the firm can maximize profits by producing those items that have the highest contribution margin per unit of the scarce resource. This ensures that the firm makes the most profitable use of the limited capacity available. Therefore, option C is the best choice.

If a Firm Has Limited Production Capacity in One Part