Question

If current output is less than the profit-maximizing output, then the next unit produced

a) will increase revenue without increasing cost.
b) will decrease profit.
c) will increase cost more than it increases revenue.

d) will increase revenue more than it increases cost.

e) may or may not increase profit

P.S. An explanation behind why will help allow for better understanding.

Answer 1

Ans) the correct option is d) will increase revenue more than it increases cost.

When the output is less than profit maximizing output, the next unit produced will increase profits because revenues will be greater than cost.

Profit = revenue - cost. When there are profits, revenues > costs