If Marginal Revenue Exceeds Marginal Cost at the Current Level

question 470

Multiple Choice

If marginal revenue exceeds marginal cost at the current level of output, profit will increase when output is expanded because

• A) other firms in the industry will shut down as the firm expands output.
• B) the market price will rise as the firm expands output.
• C) producing and selling an additional unit will add more to total revenue than it adds to total cost.
• D) marginal cost will decline as output is expanded.

Recognize the liability limitations of shareholders regarding corporate debts.

Comprehend the concept of a corporation as a separate legal entity and its implications for shareholders and directors.

Identify the legal framework for incorporating and the role of articles of incorporation.

Explain the legal responsibilities and duties of directors towards the corporation and its stakeholders.

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Definitions:

Contribution Margin Ratio

A financial metric that measures the proportion of sales revenue that exceeds variable costs, indicating how much revenue contributes to fixed costs and profit.

Variable Costs

Costs that vary in direct proportion to changes in levels of an activity or production volume.

Fixed Costs

These are expenses that do not change with the level of production or sales, such as rent, salaries, and insurance premiums.

Net Income

The total earnings of a company after subtracting all of its expenses, including taxes and operating expenses, from its total revenues.