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 Summary
This solution calculates and illustrates graphically the decision whether to concentrate production in one plant or split production between two plants.
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The firm should not produce 700 units in each plant. It should produce all 1400 ...
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