If Disposable Income Increases from $912 to $927 Billion and MPC

question 141

Multiple Choice

If disposable income increases from $912 to $927 billion and MPC = 0.6, then consumption will increase by

• A) $6 billion.
• B) $9 billion.
• C) $54 billion.
• D) $56 billion.

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Definitions:

Marginal Revenue

The supplementary earnings obtained by selling one more unit of a good or service.

Profit-Maximizing

The process or strategy of adjusting production and pricing to achieve the highest possible profit.

MR = MC

A condition where the marginal revenue (MR) equals marginal cost (MC), which is the profit maximizing level of output for a firm under perfect competition.

Marginal Revenue

The increased income derived from the sale of one extra unit of a good or service.