Question

A firm is producing a joint​ product, Product A and Product​ B, with variable proportions. At its current production​ levels, the marginal benefit of producing Product A is​ $3 and the marginal cost is​ $2 and the marginal benefit of producing Product B is​ $4 and the marginal cost is​ $5. To maximize​ profits, the managers of the firm should produce​ ________ of Product A and​ ________ of Product B.

Answer 1

Answer: The answers are "more" and "less".

Explanation: To maximize​ profits, the managers of the firm should produce​ more of Product A and​ less of Product B.

The marginal benefits of manufacturing the product a are higher than its costs, this is not the case with the product b therefore they must produce more of the "A" than of the "B".