A Firm Is Maximizing Profit by Producing Goods X and Y

Essay

A firm is maximizing profit by producing goods X and Y, using resources A and B. The firm is fully utilizing its supply of resource A, while a surplus of resource B is available. The profit contributions from per units of goods X and Y are $5 and $4 respectively. The firm is considering expansion of its supply of resource A (at a cost of $8 per unit). Increasing A by one unit would allow the firm to produce 3 additional units of X, while producing 1 fewer units of Y. Should the firm expand its supply of A? Explain.