Learning Path
Question & Answer
Choose the Best Answer
Increase production to maximize profit
Maintain current production level
Decrease production to enhance profit
Stop production entirely
Understanding the Answer
Let's break down why this is correct
When the extra cost of making one more unit is higher than the extra benefit it brings, the firm is losing money on that unit. Other options are incorrect because Some think making more always helps; Keeping production the same ignores the new loss.
Key Concepts
Marginal Analysis
hard level question
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Deep Dive: Marginal Analysis
Master the fundamentals
Definition
Marginal analysis involves comparing the marginal benefit and marginal cost to determine the optimal output level. It helps identify the point where marginal benefit equals marginal cost, ensuring allocative efficiency in production decisions. This concept is essential in economics to make informed choices about resource allocation.
Topic Definition
Marginal analysis involves comparing the marginal benefit and marginal cost to determine the optimal output level. It helps identify the point where marginal benefit equals marginal cost, ensuring allocative efficiency in production decisions. This concept is essential in economics to make informed choices about resource allocation.
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