Scenario: A small firm manufactures maple baseball bats in two small production facilities, with the following marginal cost and average total cost equations:
Plant 1: Marginal cost: MC₁ = 10 + 2Q,
Plant 1: Average total cost: ATC₁ = 10 + Q.
Plant 2: Marginal cost: MC₂ = 10 + 2Q,
Plant 2: Average total cost: ATC₂ = 10 + Q.

-Refer to the scenario above.Now suppose the plant is sold to a new owner with an undergraduate degree in economics and an MBA in finance.The new owner plans to follow the profit-maximizing rule (produce the level of output at which Marginal Cost = Price)rather than equalize production across both plants.Under this new guidance,production levels at each firm are ________.Explain your answer.
A) Produce 45 units of output at Plant 1 and shut down Plant 2
B) Produce 45 units of output at Plant 1 and produce 40 units of output at Plant 2
C) Produce 45 units of output at Plant 1 and produce 45 units of output at Plant 2
D) Produce 40 units of output at Plant 1 and 40 units of output at Plant 2

When Existing Firms Leave a Perfectly Competitive Market,it Causes ________

Multiple Choice

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