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.

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Definitions:

Selling Price

The actual amount a customer pays for a product or service.

Mark-up

A markup on the goods’ purchase cost to account for administrative expenses and profit.

SuperMart

A large supermarket, often part of a chain, offering a wide variety of goods.

Markdown

A reduction from the original or list price of a good or service to increase its attractiveness to buyers.