When the Marginal Cost of Producing a Bike Is Greater

question 269

Multiple Choice

When the marginal cost of producing a bike is greater than the marginal benefit of the bike,for resource use to be allocatively efficient,

• A) more bikes should be produced.
• B) fewer bikes should be produced.
• C) no more and no fewer bikes should be produced.
• D) it must be determined if the production of bikes can be increased.
• E) people must be educated to demand more bikes.

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Definitions:

Cost-plus Pricing

Pricing strategy where a fixed percentage is added to the total cost of making a product to determine its selling price.

Required Rate of Return

The minimum annual percentage earned by an investment that will entice individuals or companies to put money into a particular security or project.

Contribution Margin

Contribution margin is the amount by which sales revenue exceeds variable costs, indicating how much revenue contributes towards covering fixed costs and generating profit.

Production Constraint

Any factor that limits the output of a production process, such as limited machine capacity or shortages of materials or labor.