If the Marginal Utility of Apples Exceeds the Marginal Cost

question 167

Multiple Choice

If the marginal utility of apples exceeds the marginal cost of producing apples, then in a free market production of apples will ____, with the likely result that marginal utility will ____.

• A) rise; fall
• B) rise; rise
• C) rise; rise.
• D) fall; fall

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Definitions:

Differential Costs

The difference in cost between two alternative decisions, or changes in cost that result from choosing one option over another.

Equipment Replacement

The process of buying new equipment to replace old or outdated machinery to maintain or improve operational efficiency.

Useful Life

The estimated duration of time that an asset is expected to be economically usable by an entity, affecting its depreciation calculation.

Product Cost Concept

A concept used in applying the cost-plus approach to product pricing in which only the costs of manufacturing the product, termed the product cost, are included in the cost amount to which the markup is added.