Asked by Zheng Shouyi on May 20, 2024
Verified
The level of an economic activity should be increased to the point where the ____.
A) Marginal cost=0
B) Marginal revenue=0
C) Total revenue = Total cost
D) Marginal revenue - marginal cost=0
Marginal Revenue
The additional income generated by increasing product sales by one unit.
Marginal Cost
The expense associated with manufacturing an extra unit of a product or service.
Economic Activity
Actions that involve the production, distribution, and consumption of goods and services at all levels within a society.
- Comprehend the economic principles guiding investment decisions through the evaluation of marginal cost versus marginal revenue.
- Acknowledge the critical role that marginal cost plays in improving economic activity optimization.
Verified Answer
GG
Gerardo GarciaMay 21, 2024
Final Answer :
D
Explanation :
The level of economic activity should be increased to the point where the marginal revenue (MR) equals the marginal cost (MC), or where MR - MC = 0. This is because at this point, the firm is producing the optimal quantity of output where the marginal benefit equals the marginal cost, and therefore maximizing profits. Options A and C are incorrect because they do not take into account the concept of marginal analysis. Option B is incorrect because if marginal revenue were equal to zero, it means that additional units of output are not generating any further revenue, which is not a economically optimal situation.
Learning Objectives
- Comprehend the economic principles guiding investment decisions through the evaluation of marginal cost versus marginal revenue.
- Acknowledge the critical role that marginal cost plays in improving economic activity optimization.