Question

A firm with two factories one in Michigan and one in Texas has decided that it should produce a total of 500 units of output in order to maximize profit. The firm is currently producing 200 units in the Michigan factory and 300 units in the Texas factory. At this allocation between plans the last units of output produced in Michigan added $5 to total cost while the last units of output products in Texas added $3 to total the firm

a. is maximizing profit should keep producing 200 units in Michigan and 300 units in Texas
b. should produce 250 units in each factory
c. should produce more in the Michigan factory and less in the Texas factory
d. should produce more in the Texas factory and less in the Michigan factory

Answer 1

Answer: d. should produce more in the Texas factory and less in the Michigan factory

Step-by-step explanation:

A company stands to benefit more if it produces at less cost because then it can produce more goods or rather make more profit.

This company is is spending $3 to make an additional unit in Texas than in Michigan where it is spending $5.

It is spending less in Texas and should therefore shift more production to Texas so that it can spend even less when producing and therefore become more profitable.