Asked by KAREN NOELIA PINEDA on Jul 12, 2024
Verified
Which of the following statements is true
A) A firm should increase quantity as long as average cost is greater than price
B) A firm should increase quantity as long as price is greater than marginal cost
C) A firm should increase quantity as long as price is higher than average cost,regardless of the marginal cost
D) A firm should increase quantity as long as marginal cost is greater than price
Marginal Cost
The increase in total cost that arises from producing one additional unit of a product or service.
Increase Quantity
A strategy or action aimed at raising the amount of goods or services produced or available.
- Implement marginal analysis concepts when deciding on production.
Verified Answer
AC
Annmarie CorreaJul 13, 2024
Final Answer :
B
Explanation :
A firm should increase quantity as long as the price is greater than the marginal cost. This is because at this point, the firm is making a profit on each additional unit produced. If the price is below the marginal cost, the firm would be better off not producing at all, as each additional unit would result in a loss. Therefore, option B is the correct statement.
Learning Objectives
- Implement marginal analysis concepts when deciding on production.