If Profits Depend on Both How Much Is Produced (Output)

question 4

Multiple Choice

If profits depend on both how much is produced (output) and the level of quality, then a profit-maximizing firm should choose the levels of output and quality at which

• A) The marginal revenue of output exceeds the marginal cost of output by the largest amount.
• B) The marginal revenue of quality exceeds the marginal cost of quality by the largest amount.
• C) The difference between the addition to total revenue and the addition to total cost of the last units of output and quality is the greatest.
• D) both a and b
• E) none of the above

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Definitions:

Physical Object

An item that can be seen and touched, possessing physical characteristics such as shape, volume, and mass.

Service

The action of helping or doing work for someone, often referring to activities performed in exchange for payment that do not result in the ownership of tangible goods.

Marketing

The business process of identifying, anticipating, and satisfying customers' needs and desires through the creation and exchange of value.

San Francisco Opera

A renowned opera company based in San Francisco, California, known for its performances of classical and contemporary operas.