Answer to Question #139642 in Microeconomics for Bernadette Muzeta

Question

You are given a firm under perfect competition. The firm has two plants. It is faced with the problem of allocating a given total output between the two plants that it owns.
(a) How should the firm allocate its total output among the two plants.
(b) Graphically illustrate the allocation.

Answer 1

1. either the firm produces a positive output in each plant and the marginal cost in each plant is the same.
2. or the firm produces all its output in one plant, and the marginal cost in this plant is no greater than the marginal cost at the output of zero in the other plant.