Assume You Are in the Business of Producing and Selling

question 30

Multiple Choice

Assume you are in the business of producing and selling t-shirts. If you could produce more t-shirts with the same input what would happen to your productivity and profits assuming the price of your t-shirts remains the same?

• A) Increase in productivity, decrease in profits
• B) Increase in productivity, increase in profits
• C) Decrease in productivity, decrease in profits
• D) Decrease in productivity, increase in profits

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Definitions:

Marginal Product

The additional output resulting from using one more unit of a particular input while holding all other inputs constant.

Accounting Profits

The difference between total revenue and explicit costs, representing the net income shown on a company's financial statements.

Implicit Costs

The opportunity costs associated with a company's use of resources that it owns, representing the potential income lost by not using those resources in an alternative way.