Asked by Tabatha Magnuson on Jun 15, 2024
Verified
If current output is less than the profit-maximizing output, then the next unit produced
A) will decrease profit.
B) will increase cost more than it increases revenue.
C) will increase revenue more than it increases cost.
D) will increase revenue without increasing cost.
E) may or may not increase profit.
Profit-Maximizing Output
The level of production at which a firm achieves the highest possible profit, determined by where marginal cost equals marginal revenue.
Revenue
The total income generated by a business from its normal business activities, such as sales of goods or services, before any expenses are deducted.
Cost
The value of everything that is consumed to produce a good or service, including materials, labor, and other expenses.
- Unravel the ties between total revenue, total cost, marginal revenue, and marginal cost and their critical role in profit maximization.
- Apply marginal analysis methods to calculate the output levels that optimize profit.
Verified Answer
JB
Jenna BrooksJun 19, 2024
Final Answer :
C
Explanation :
If current output is less than the profit-maximizing output, then the marginal revenue of producing another unit will be greater than the marginal cost of producing another unit. This means that producing one more unit will increase revenue more than it increases cost, thus increasing profit. Therefore, choice C is the correct answer.
Learning Objectives
- Unravel the ties between total revenue, total cost, marginal revenue, and marginal cost and their critical role in profit maximization.
- Apply marginal analysis methods to calculate the output levels that optimize profit.