Refer to the Following Figure When Answering

question 70

Multiple Choice

Refer to the following figure when answering
Figure 4.1: Production Function
-Consider Figure 4.1. The shape of this production function suggests:

• A) Not enough information is given.
• B) a diminishing marginal product of labor
• C) a constant marginal product of capital
• D) an increasing marginal product of capital
• E) a diminishing marginal product of capital

---

Definitions:

Penetration Pricing

A pricing strategy where the price of a new product is intentionally set lower than the competition to gain market share quickly.

Price Skimming

A pricing strategy in which a company charges the highest initial price that customers will pay for a new product, then gradually lowers the price to attract more price-sensitive customers.

Variable Costs

Costs that change in proportion to the level of activity or volume of output in a business, such as raw materials and labor costs.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent or salaries.