Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Outsourcing production to countries with lower labor costs
B
Investing in advanced technology to automate manufacturing
C
Increasing the price of goods to improve profit margins
D
Reducing the workforce to lower operational expenses
Understanding the Answer
Let's break down why this is correct
Answer
To minimize costs effectively, a firm should focus on production efficiency and cost-benefit analysis. Production efficiency means making goods in the best way possible, using the least amount of resources like time and materials. Cost-benefit analysis helps the firm decide if the benefits of a decision outweigh the costs involved. For example, if a company considers investing in new machinery, it should compare the cost of the machine with the savings it will generate by producing faster and with less waste. By carefully analyzing these factors, the firm can make informed choices that help reduce costs and improve overall profitability.
Detailed Explanation
Investing in advanced technology helps a firm make products faster and cheaper. Other options are incorrect because Outsourcing might seem cheaper, but it can lead to quality issues and hidden costs; Raising prices can lead to fewer sales.
Key Concepts
production efficiency
cost-benefit analysis
Topic
Cost Minimization in Firms
Difficulty
medium level question
Cognitive Level
understand
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