Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Total revenue decreases
B
Total revenue remains the same
C
Total revenue increases
D
Total revenue becomes zero
Understanding the Answer
Let's break down why this is correct
Answer
When a firm increases production and the marginal cost is less than the price of the product, total revenue will increase. This is because each additional unit produced costs less to make than the price at which it can be sold, leading to a profit on each unit. For example, if a company sells a toy for $10 and it costs $7 to make, the marginal cost is $7, which is less than the price. By producing and selling more toys, the firm earns more money, as each new toy adds $3 to its total revenue. Therefore, as long as the marginal cost remains lower than the price, increasing production will be beneficial for the firm's total revenue.
Detailed Explanation
When a firm produces more and the cost to make one more item is less than what they sell it for, they earn more money. Other options are incorrect because Some might think that making more will hurt profits; It may seem like more production won't change anything.
Key Concepts
marginal cost
Topic
Marginal Costs and Total Revenue
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.