EC238 Study Guide - Marginal Cost, Mac-10, Webct
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Numbers in brackets refer to minutes and marks. [5 each: each of the following statements is either true, false or uncertain. State which each is and brie y, but precisely explain your answer. Your explanation is the most important part of your answer. (a) the equimarginal principle states that a rm"s total costs of production will be minimized if it equates production levels at each of its plants. False/uncertain: the equimarginal principle states that if the marginal costs of production are equated across plants then the rm"s total costs of production will be minimized. This usually does not coincide with the levels of output being the same at each plant. However, under the special case where each plant had identical marginal cost curves, then marginal costs would be equated at a common level of output. If you stated that by equating mac at each plant, rms will minimize costs, you received part marks.