8. The invisible hand Suppose you own two factories that produce widgets. Factor

Question

8. The invisible hand Suppose you own two factories that produce widgets. Factory 2 is suitably located near a firm that sells raw materials needed to make widgets, whereas Factory 1 is in a more remote location and thus has higher transportation costs. Assume zero fixed costs for both factories. The graph below illustrates the marginal cost (MC) for producing widgets in each of these factories. cintos 24 20 TC (Factory 1) MC (Factory 1) 16 TC (Factory 2) MC (Factory 2) lac Videc 12 0 Session s59:05 0 4 8 12 16 20 24 QUANTITY (Thousands)

Explanation / Answer

Option 3

We can select Option 3 as it is the lowest. Here at factory 1 we can produce 6 thousand at MC = 6 and at factory 2 remaining 12 thousand widgets at MC = 6.

TC 1 TC 2 TC 3 Option 1 0 81 81 Option 2 40.5 20.25 60.75 Option 3 18 36 54

Related Questions

Navigate

• Browse (All)
• Browse 8
• Subjects

---

---

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