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Suppose You Are Deciding Whether or Not to Increase Production

question 134

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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


Definitions:

Necessities

Goods and services that are essential for survival, such as food, shelter, and healthcare, often characterized by inelastic demand.

Luxuries

Goods or services that are considered non-essential but are desired for their ability to provide comfort, convenience, or pleasure.

Elasticity Of Supply

A measure of how much the quantity supplied of a good responds to a change in the price of that good.

Inputs

Resources used in the production process, including labor, capital, materials, and energy.

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