Asked by Michelle Warren on Jun 24, 2024
Verified
Two firms have the same technology and must pay the same wages for labor.They have identical factories, but firm 1 paid a higher price for its factory than firm 2 did.If they are both profit maximizers and have upward-sloping marginal cost curves, then we would expect firm 1 to have a higher output than firm 2.
Marginal Cost Curves
Graphical representations that show how the cost of producing one additional unit of a good varies as the quantity of output produced changes.
Profit Maximizers
Refers to firms or individuals who alter their production or operational levels to achieve the highest possible profit margins.
- Analyze the role of fixed and variable costs in firm's production and pricing decisions.
Verified Answer
LS
lovepreet singhJun 26, 2024
Final Answer :
False
Explanation :
The price of the factory is a sunk cost and does not affect the firm's marginal costs. The firm's output will depend on their marginal cost curves and demand for their product, not the price of their factory.
Learning Objectives
- Analyze the role of fixed and variable costs in firm's production and pricing decisions.
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