Scenario: the Scenario Above Changes, Because an Increase in the Wages

question 219

Multiple Choice

Scenario: The scenario above changes, because an increase in the wages of workers at Plant 2 causes marginal costs and average total costs at Plant 2 to rise:
Plant 2: New marginal cost: MC₂ = 20 + 2Q,
Plant 2: Average total cost: ATC₂ = 20 + Q.
Costs at Plant 1 do not change.

-Refer to the scenario above.Faced with different costs at each facility,what are the levels of output produced at each facility under the new owner's guidance to maximize firm profits? Explain your answer.

• A) Produce 40 units of output at Plant 1 and shut down Plant 2
• B) Produce 45 units of output at Plant 1 and shut down Plant 2
• C) Produce 45 units of output at Plant 2 and 40 units of output at Plant 2
• D) Produce 45 units of output at Plant 1 and 45 units of output at Plant 2

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Definitions:

Nondiscriminating Monopolist

A monopolist who charges all consumers the same price for its product, regardless of the quantity demanded or consumer preferences.

Marginal Cost

The investment needed to produce an extra unit of a product or service.

Profit-Maximizing

The process or strategy of adjusting the production and sale of goods or services to generate the highest possible profit.

Pure Monopolist

An entity that is the sole supplier of a unique product or service without close substitutes, giving it significant control over the market price.