Asked by Charlie Sunder on Sep 23, 2024
Verified
Which of the following is true
A) Increasing output always leads to increase in profits
B) Increasing outputs increase profits if price is above marginal cost
C) Increasing output increases profits if price is lea than marginal costs
D) Increasing output always decreases profits
Marginal Cost
The additional expense incurred from producing and selling one more unit of a good or service.
Profits
The financial gain realized when the amount earned from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.
Output
The total amount of goods or services produced by a company, industry, or economic system.
- Understand the concept of economies and diseconomies of scale.
Verified Answer
PS
paramveer singh5 days ago
Final Answer :
B
Explanation :
According to the basic principle of profit maximization, increasing output increases profits only if the price is above the marginal cost. This is because the marginal cost represents the additional cost of producing one additional unit, and if the price is below that cost, producing more units will result in losses rather than profits. Therefore, option B is the correct answer. Options A, C, and D are incorrect because they make generalized statements that do not take into account the relationship between price and marginal cost.
Learning Objectives
- Understand the concept of economies and diseconomies of scale.
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