Asked by Jiajia Jiang on Jun 30, 2024

verifed

Verified

​A manager of a clothing firm is deciding whether to add another factory in addition to one already in production.The manager would compare

A) ​The total revenue gained from the two factories to the total costs of running the two factories.
B) The marginal revenue expected from the second factory to the total costs of running the two factories.
C) The marginal revenue expected from the second factory to the marginal cost of the second factory.
D) ​The total revenue gained from the two factories to the marginal costs of running the two factories.

Marginal Revenue (MR)

The increase in income resulting from the sale of one extra unit of a good or service.

Marginal Cost (MC)

The growth in overall expenses incurred from the manufacture of an extra unit of a product or service.

Additional Factory

A supplementary manufacturing facility established by a company to increase production capacity.

  • Pinpoint and execute mathematical strategies to achieve peak profitability, focusing on the comparison between marginal cost and marginal revenue.
verifed

Verified Answer

SY
Sinem Y?ld?zJul 06, 2024
Final Answer :
C
Explanation :
The manager should compare the marginal revenue expected from the second factory to the marginal cost of the second factory. This will ensure that the cost of producing the additional goods is less than the revenue generated from selling them. Comparing total revenue and total costs would not account for the expenses and revenue generated by each individual factory. Comparing marginal revenue to total costs would not account for the specific costs and revenue associated with the second factory. Comparing total revenue to marginal costs would not account for the specific revenue generated by the second factory.