Refer to the Following

Multiple Choice

Refer to the following:

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.


-If the firm produces 201 units in Michigan and 299 units in Texas instead:

A) total cost will decrease $2
B) profit will increase $2
C) total cost will decrease $3
D) both a and b
E) none of the above