Suppose You Are Deciding Whether or Not to Increase Production

question 134

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 $12, but your increase in revenue will be $11. 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:

Functional Organization

An organizational structure where the company is divided into departments based on their functions, such as marketing or finance.

Product Design

The process of ideating, creating, and iterating products that solve users’ problems or address specific needs in the market.

Multidivisional Design

An organizational structure where operations are grouped into semi-autonomous divisions based on product, service, or market, allowing for focused management and resource allocation.

Specialized Activities

Tasks or operations that require specific skills or knowledge, often related to a particular field or profession.