A Firm with Two Factories,one in Michigan and One in Texas,has

question 42

Multiple Choice

A firm with two factories,one in Michigan and one in Texas,has decided that it should produce a total of 500 units of output in order to maximize profit.The firm is currently producing 200 units in the Michigan factory and 300 units in the Texas factory. At this allocation between plants,the last unit of output produced in Michigan added $5 to total cost,while the last unit of output produced in Texas added $3 to total cost.The firm

• A)is maximizing profit; should keep producing 200 units in Michigan and 300 units in Texas.
• B)should produce 250 units in each factory.
• C)should produce more in the Michigan factory and less in the Texas factory.
• D)should produce more in the Texas factory and less in the Michigan factory.

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Definitions:

Phantom Profits

Profits that are recorded on the books but do not result in an actual cash benefit, often due to accounting practices or non-cash expenses.

Paper

Paper refers to a thin material composed of processed cellulose fibers derived from wood, rags, or grasses, and used for writing, printing, or packaging.

Unit Price

The cost assigned to a single unit of a product or service, which helps consumers compare prices and make purchasing decisions.

LIFO Inventory Method

An inventory costing method that assumes the last items put into inventory are the first ones taken out, used in calculating cost of goods sold.