If the Shadow Price of a Given Resource Is $100

question 39

Multiple Choice

If the shadow price of a given resource is $100 and the cost of expanding the capacity of that resource is $80 per unit, then the expansion of the capacity will:

• A) earn positive profits.
• B) earn zero profit, but the firm will stay in business.
• C) temporarily earn negative profits.
• D) not be a rational decision.
• E) not affect the profit level.

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Definitions:

Money Constraints

Financial limitations or restrictions that impact one's ability to spend, invest, or allocate funds.

Company Policy

Guidelines and rules set by a company to dictate behavior and procedures within the organization.

Passive Verb

A form of verb that indicates the subject of the sentence is the recipient of the action rather than the doer.

Recommendations

Suggestions or advice given based on analysis or expertise.