When a profit-maximizing firm undertakes production in more than one plant, it will allocate a fixed level of inputs such that _____ is equal across plants.
A) the total product
B) the marginal cost of production
C) the marginal product
D) the average product
E) Answers the marginal product and the average product are both correct.

Question

Quizplus · Accepted Answer

When a profit-maximizing firm undertakes production in more than one plant, it will allocate a fixed level of inputs such that the marginal product is equal across plants. This is because in order to maximize profits, the firm must produce each unit of output at the lowest possible cost, and allocating inputs such that the marginal product is equal across plants allows the firm to achieve this goal.

When a Profit-Maximizing Firm Undertakes Production in More Than One