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    Output determination in multi-plant business

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    A firm uses two plants (A and B) to produce a product. The plant's marginal cost functions are given by the following equations:
    MCa=10+.01Qa and MCb=4+.03Qb

    If the firm wanted to produce 1400 units should it produce 700 units in each plant? Why or why not? Explain and illustrate graphically.

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    Solution Preview

    The firm should not produce 700 units in each plant. It should produce all 1400 ...

    Solution Summary

    This solution calculates and illustrates graphically the decision whether to concentrate production in one plant or split production between two plants.