Suppose That a Firm Successfully Introduces a Highly Profitable New

question 168

Multiple Choice

Suppose that a firm successfully introduces a highly profitable new product.If this new product offers less marginal utility per unit to consumers than existing substitute products, then the

• A)laws of economics have been violated.
• B)new product must have increasing, not diminishing, marginal utility.
• C)existing products were being produced at a loss.
• D)new product has a lower price than the existing substitute products.Difficulty: 02 Medium

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Definitions:

Diminishing Returns

An economic principle stating that as investment in a particular area increases, the rate of profit from that investment, after a certain point, cannot increase proportionally and starts to decrease.

Exponential Function

A mathematical function denoted as f(x) = a * b^x, where 'b' is a positive real number, and 'a' is a constant, used to model growth or decay processes.

Linear Function

A mathematical expression that represents a straight line, characterized by a constant rate of change.

Outsourcing Decision

The process of determining whether certain business operations or services should be performed in-house or contracted to external providers.