A Firm Will Work to Differentiate Its Product Up to the Point

question 45

Multiple Choice

A firm will work to differentiate its product up to the point that

• A)it develops a product unlike anything else in the market.
• B)the increase in revenue equals the cost of development.
• C)revenue is maximized.
• D)all innovation is exhausted.
• E)the increase in product price as a result of research equals the price of the competition.

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Definitions:

Average Fixed Cost

The fixed costs of production (e.g., rent, salaries) divided by the quantity of output produced; these costs decline as production increases.

Average Variable Cost

Total variable costs divided by the quantity of output, showing the variable cost per unit of output.

Marginal Cost

The price to produce an additional unit of a product or service.

Total Costs

The total expense of manufacturing that encompasses all constant and fluctuating costs.