Question: A firm has three different production facilities all of which
A firm has three different production facilities, all of which produce the same product. While reviewing the firm’s cost data, Jasmin, a manager, discovers that one of the plants has a higher average cost than the other plants and suggests closing that plant. Another manager, Joshua, notes that the high- cost plant has high fixed costs but that the marginal cost in that plant is lower than in the other plants. He says that the high- cost plant should not be shut down but should expand its operations. Who is right?
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