Two firms have the same technology and must pay the same wages for labor.They have identical factories, but firm 1 paid a higher price for its factory than firm 2 did.If they are both profit maximizers and have upward-sloping marginal cost curves, then we would expect firm 1 to have a higher output than firm 2.

Question

Quizplus · Accepted Answer

The price of the factory is a sunk cost and does not affect the firm's marginal costs. The firm's output will depend on their marginal cost curves and demand for their product, not the price of their factory.

Two Firms Have the Same Technology and Must Pay the Same