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What effect would this have on overall profits

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Reference no: EM132272966

a. A firm has increasing returns to scale and is making profits. The government is concerned that the firm has grown too big, and splits it into two smaller firms of equal size. What effect would this have on overall profits?

b. If p MP1 < w1, should the firm increase or decrease the amount of factor 1, assuming the firm wants to maximize its profits?

Reference no: EM132272966

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