How Much Revenue a Firm Brings in by Improving the Quality

question 16

Multiple Choice

How much revenue a firm brings in by improving the quality of a product such that more consumers want to buy it depends on which two factors?

• A)The decrease in demand caused by the increase in quality and the incremental profit earned on each additional unit sold
• B)The increase in demand caused by the increase in quality and the incremental profit earned on each additional unit sold
• C)The increase in demand caused by the increase in quality and the incremental loss on each additional unit sold
• D)The decrease in demand caused by the increase in quality and the incremental loss on each additional unit sold
• E)The quality of changes to the original product and the decrease in demand cause by the changes in quality

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Definitions:

Production Possibilities Frontier

A graph illustrating the maximum possible output combinations for two products that a country can produce given its technological capabilities and quantity of inputs.

Unemployment

The situation when individuals who are capable of working and are actively seeking employment are unable to find a job.

Production Possibilities Curve

A curve depicting all maximum output possibilities for two goods, given a set of inputs and technology.

Unemployment Rate

The fraction of the labor market actively in pursuit of work but is currently jobless.