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The American Widget Corporation (AWC) is a profit-maximizing and perfectly competitive firm that is currently experiencing a loss. However, the market price of widgets is expected to increase in the near future. The company's vice-president, Alan R. ("Big Tuna") Burns, has recommended against increasing output in response to a higher price for widgets. His argument is that the marginal cost of the additional units of output will increase, and these higher costs will worsen AWC's losses. Evaluate this argument using an appropriate picture.
Cash Balances
Available cash on hand or in bank accounts that a company uses for daily operations.
Investments in Inventory
Funds allocated by a business to purchase goods and materials held for resale or production.
Minimum Costs
The lowest amount that can be spent on the production of a good or service while maintaining its quality.
Holding Inventory
The process of storing unsold goods or materials that a business intends to sell to generate revenue.
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