DWR has two facilities at which it produces its Reid couches. At facility 1, the

Question

DWR has two facilities at which it produces its Reid couches. At facility 1, the marginal cost of production is equal to MC1 = 1,200 + 4 Q1 , while the marginal cost at facility 2 is MC2 = 1,600 + 6 Q2 . The fixed cost is the same at both facilities. DWR plans to produce 175 couches and it wants to allocate them between the two plants in a cost minimizing fashion. Thus, DWR should

a) Produce 152 at facility 1 and the rest at facility 2

b) Produce 28 at facility 1 and the rest at facility 2

c) Produce all the tables at facility 1

d) None of the above

Explanation / Answer

c) Produce all the tables at facility 1- If we graph the two MC curves,we see that MC curve of firm 2 will lie higher to that of firm 1 and hence this option will never be choosen by DWR.

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.