Question

A multiplant monopolist can produce her output in either of two plants. Having sold all of her output she discovers that the marginal cost in plant 1 is R30 while the marginal cost in plant 2 is R20. To maximize profits the firm will

Answer 1

Each production plant will have to choose the individual production output level following the maximising principle. For a monopoly with two plants, we have;

$Max \Pi= P_x(X)- C_1(X_1)- C_2(X_2)$

To maximize profit;

$MC_1= MR= MC_2$