Suppose a Company Increases Production from a Point Where Marginal

question 148

Multiple Choice

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

• A) No, average total costs have increased which means the company is not minimizing losses.
• B) Yes, because average variable costs are always less than average total costs.
• C) No, because the marginal cost of producing the last unit is the same as the marginal revenue.
• D) Yes, even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units.
• E) No, the previous level of output was the most efficient because it had the lowest average total cost.

---

Definitions:

Interest Rate

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal, per period of time.

Years From Now

Projected or anticipated time in the future, often used in planning, forecasting, or speculation about future conditions or situations.

Interest Rate

The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan amount.

Present Value

The determination of today's monetary value for a future cash sum or succession of cash flows, applying a chosen rate of return.