The Decision to Accept Additional Business Should Be Based on a Comparison

question 64

True/False

The decision to accept additional business should be based on a comparison of the incremental (differential) costs of the added production with the additional revenues to be received.

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Definitions:

Equate Price

The action of setting two or more goods or services to have the same price.

Marginal Cost

The outlay involved in the creation of an additional unit of a good or service.

Pareto Efficient

An economic state where resources are allocated in a way that it is impossible to make any one individual better off without making at least one individual worse off.

Efficiency

A measure of how well resources are used to achieve a goal, maximizing output from given inputs without waste.