A firm produces a good in two factories: one in Tucson and one in Phoenix. Historically, the plants' long-run average costs have been comparable. Engineers have found that output elasticity at the Tucson plant is 1.1, while at Phoenix it is .93. A senior production manager has recommended expanding the scale of production in Tucson over the next few years and cutting production in Phoenix. Examine the validity of this proposal.

Question

Quizplus · Accepted Answer

The Answer of A firm produces a good in two factories: one in Tucson and one in Phoenix. Historically, the plants' long-run average costs have been comparable. Engineers have found that output elasticity at the Tucson plant is 1.1, while at Phoenix it is .93. A senior production manager has recommended expanding the scale of production in Tucson over the next few years and cutting production in Phoenix. Examine the validity of this proposal.

A Firm Produces a Good in Two Factories: One in Tucson