A firm has two plants, which have Marginal Cost functions given by: MC(Q1)=2Q1 and MC(Q2)=4Q2. What...

A firm has two plants, which have Marginal Cost functions given by: MC(Q₁)=2Q₁ and MC(Q₂)=4Q₂. What is the overall Marginal Cost function? Q denotes the total output.

	a.	6Q.
	b.	4Q/3.
	c.	3Q.
	d.	2Q/3.

Solutions

Expert Solution

Answer : 6Q

Total marginal cost of a multiplant firm is the horizontal summationn of Marginal cost of individual plants. inorder to get overall marginal cost of a mutiplant firm, it has to add marginal cost of each plant. Overall marginal cost represent additional cost incurred to the firm for producing an additional unit. Firm will equate overall Marginal cost to Marginal revenue to find its profit maximizing level of output and price.

Overall marginal cost= MC (Q1)+MC(Q2)

= 2Q1+4Q2

=6Q

Q1 -- represent output of plant 1

Q2 represent output of plant 2.

Q represent output produced by that firm from both plants.

Rahul Sunny answered 1 year ago

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