Suppose a Company Increases Production from a Point Where Marginal

question 148

Multiple Choice

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

• A) No, average total costs have increased which means the company is not minimizing losses.
• B) Yes, because average variable costs are always less than average total costs.
• C) No, because the marginal cost of producing the last unit is the same as the marginal revenue.
• D) Yes, even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units.
• E) No, the previous level of output was the most efficient because it had the lowest average total cost.

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Definitions:

Progressive

Refers to a tax system where the tax rates increase as the taxable amount increases, often aimed at reducing inequality.

Deadweight Loss

A loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved.

Personal Taxes

Taxes levied on individuals' income or wealth by a government.

Progressive Tax

A taxation system in which the tax rate increases as the taxable amount increases, placing a higher burden on those who earn more.