If profits depend on both how much is produced (output) and the level of quality, then a profit-maximizing firm should choose the levels of output and quality at which
A. The marginal revenue of quality exceeds the marginal cost of quality by the largest amount.
B. The marginal revenue of output exceeds the marginal cost of output by the largest amount.
C. The difference between the addition to total revenue and the addition to total cost of the last units of output and quality is the greatest.
D. both a and b
E. none of the above
Answer: E
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Using the figure above, suppose with no trade Liz and Joe each produce at point A on their respective PPFs. Then, Liz suggests that they specialize and trade. She would produce only smoothies and Joe would produce only salads
Then she would sell 10 smoothies to Joe at a price of 2.5 salads per smoothie. In this scenario, A) Liz gains 5 smoothies, and Joe gains 10 smoothies. B) Liz gains 10 smoothies, and Joe loses 5 smoothies. C) Liz gains 5 smoothies and 5 salads, and Joe loses 5 salads. D) Liz gains 10 smoothies and 5 salads, and Joe gains 5 smoothies. E) Neither of the individuals gains from trade.
Most U.S. imports are
a. manufactured goods b. agricultural services c. petroleum and related products d. minerals such as bauxite and nickel e. military goods