Question

1. To maximize its profit, a firm with two plants should
   1. produce the output at which total marginal cost equals marginal revenue.
   2. choose the profit-maximizing output then allocate it equally between the two plants.
   3. allocate output so that marginal cost is the same in two plants
   4. both a and b
   5. both a and c

1. In a repeated decision for which the present value of the benefits of cheating is greater than the present value of the costs of cheating,deciding not to cheat is a value-maximizing decision.

1. b.             deciding to cooperate is a value-maximizing decision.
   c.             deciding to cheat is a value-maximizing decision.
   d.             both a and b

Answer 1

1. Ans: both a and c

Explanation:

The profit maximization condition for a firm is to produce output where MR = MC.

If the firm has two plants, it should allocate the total output so that MC in bopth the plant is equal.

2. Ans: deciding to cheat is a value-maximizing decision.

Explanation:

If present value of the benefits of cheating is greater than the present value of the costs of cheating, , then cheating would increase the present value of a firm. Thus, deciding to cheat is a value-maximizing decision.