Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Produce the additional batch because the marginal benefit exceeds the marginal cost.
B
Not produce the additional batch because the cost is too high.
C
Produce the additional batch only if overall sales increase.
D
Not produce the additional batch because cookies are not in demand.
Understanding the Answer
Let's break down why this is correct
Answer
Marginal analysis helps businesses make decisions by comparing the additional costs and benefits of producing more items. In Alex's case, the marginal cost of making another batch of cookies is $20, but the marginal benefit from selling it is $30. This means that by producing the extra batch, Alex would gain $30 but only spend $20, resulting in a profit of $10. Since the benefit is greater than the cost, it makes sense for Alex to produce the additional batch of cookies. Therefore, based on marginal analysis, Alex should go ahead and make the extra cookies to maximize his profit.
Detailed Explanation
Alex should make the extra batch. Other options are incorrect because This answer thinks the cost is too high; This option suggests only producing if sales go up.
Key Concepts
Marginal Analysis
Marginal Cost and Benefit
Opportunity Cost
Topic
Marginal Analysis in Economics
Difficulty
easy level question
Cognitive Level
understand
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