Big Green Company Is Considering Introducing a New Product to Replace

question 22

Multiple Choice

Big Green Company is considering introducing a new product to replace an existing product.The new product would result in increased revenues,but slightly lower overall profits because the product will cause injury to a few users and Big Green will compensate persons who are injured.The introduction of this product would be the proper decision under:

• A) both the moral minimum theory and the profit maximization theory
• B) neither the moral minimum theory nor the profit maximization theory
• C) the moral minimum theory,but not under the profit maximization theory
• D) the profit maximization theory,but not under the moral minimum theory

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Definitions:

Lower Cost

Refers to the reduction in expenses required to produce goods and services, improving profitability.

Surplus

An amount of something left over when requirements have been met; in economics, it typically refers to excess supply over demand.

Shortage

A market condition whereby the request for a service or product goes beyond what is readily available.

Equilibrium Quantity

The quantity of goods or services supplied and demanded at the point where supply and demand curves intersect, resulting in market equilibrium.