Scenario: the Scenario Above Changes, Because an Increase in the Wages

Scenario: The scenario above changes, because an increase in the wages of workers at Plant 2 causes marginal costs and average total costs at Plant 2 to rise:
Plant 2: New marginal cost: MC₂ = 20 + 2Q,
Plant 2: Average total cost: ATC₂ = 20 + Q.
Costs at Plant 1 do not change.

-Refer to the scenario above.Faced with different costs at each facility,what are the levels of output produced at each facility under the new owner's guidance to maximize firm profits? Explain your answer.

A) Produce 40 units of output at Plant 1 and shut down Plant 2
B) Produce 45 units of output at Plant 1 and shut down Plant 2
C) Produce 45 units of output at Plant 2 and 40 units of output at Plant 2
D) Produce 45 units of output at Plant 1 and 45 units of output at Plant 2

Correct Answer:

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