Question

Jones Industries has a monopoly on the tennis ball market and they have two factories. Plant 1 has MC1 = 0.005Q1 and Plant 2 with MC2 = 6. The fixed costs of operating each plant are zero. Jones is currently producing 1,400 units at Plant 1 and 800 units at Plant 2.

a) What could Jones Industry do to save on production costs while maintaining the same output? For full credit draw on the graph below the two MC curves. (Hint-doing this will allow you to find the optimal output that minimizes the total cost of production).

b) Rearranging output between the two plants saves Jones Industries how much money and since the costs of production have been lowered what should they do with output now?

Answer 1