Learning Path
Question & Answer
Choose the Best Answer
Profit will increase due to higher sales volume
Profit will decrease as production becomes inefficient
Profit will remain unchanged at optimal output
Profit will fluctuate randomly without a clear trend
Understanding the Answer
Let's break down why this is correct
When the cost of making one more unit is higher than the money earned from it, the extra cost is not matched by extra income. Other options are incorrect because This answer assumes higher sales always help profits; The idea here is that profit stays the same, but when extra units are unprofitable, profit falls.
Key Concepts
Marginal Analysis
medium level question
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Deep Dive: Marginal Analysis
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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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