A Small Island Nation Produces Only Boxes of Macaroni and Cheese

question 118

Multiple Choice

A small island nation produces only boxes of macaroni and cheese, most of which it sells in the export market. The world price per box is $10, regardless of the quantity exported. The nation has three macaroni and cheese factories, each of which varies in efficiency and each has rising marginal costs. To profit the most as a country, what would this nation do?

• A) Produce at each factory until the marginal cost rises to $10.
• B) Produce at each factory, but only as long as the marginal cost is well below $10.
• C) Produce only at the most efficient factory until the marginal cost is $10.
• D) Produce only at the most efficient factory, but only if the marginal cost is well below $10.

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