Suppose That a Firm Is Producing Where MR > MC

question 41

Multiple Choice

Suppose that a firm is producing where MR > MC. If the firm produced one more unit of output, total revenue would ____ and profit would ____.

• A) increase; increase
• B) increase; decrease
• C) decrease; increase
• D) decrease; decrease

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Definitions:

Unemployment Rate

The percentage of the working-age population that is unemployed and in the process of looking for a job.

Sacrifice Ratio

An economic term that refers to the amount of production or output that must be forgone in order to reduce inflation by one percentage point.

Disinflates

The process of reducing the rate of inflation; a slowing in the rate at which prices increase, typically as a result of monetary policy actions.

Sacrifice Ratio

The sacrifice ratio is an economic concept that measures the cost of reducing inflation in terms of lost output or unemployment.