Suppose You Are Deciding Whether or Not to Increase Production

question 139

Multiple Choice

Suppose you are deciding whether or not to increase production. You are currently making a profit. If you produce one more unit your increase in cost will be $10, your average variable costs will increase to less than that and your average fixed costs will decrease. Finally, your average revenue will increase to $10, but your increase in revenue will be $9. You should

• A)Increase production by at least 1 unit.
• B)Increase production by exactly 1 unit.
• C)Leave production unchanged, profit is maximized where you are.
• D)Redo the math associated with decreasing production because that may result in greater profit.

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Definitions:

Yearly

Relating to or happening every year; annual.

Borrow

The act of receiving something with the intention of returning it or its equivalent to the owner at a later date.

Preferred Stock

Preferred stock is a type of equity that typically gives its holders preference over common stockholders in terms of dividends and claims on assets in the event of liquidation, but usually does not carry voting rights.

Rate of Return

The financial outcome, whether positive or negative, on an investment over a set duration, highlighted as a percentage of the investment's initial expenditure.