Russell's Shoe Repair also produces custom-made shoes. When Mr. Russell produces 12 pairs a week, the marginal cost (MC) of the twelfth pair is €84, and the marginal revenue (MR) of that unit is €70. What would you advise Mr. Russell to do?

Question

Quizplus · Accepted Answer

The marginal cost (MC) of producing the twelfth pair of custom-made shoes is higher than the marginal revenue (MR) earned from that unit, indicating that the production level is not efficient. Therefore, Mr. Russell should reduce his production level of custom-made shoes to increase profitability. Choosing to produce fewer custom-made shoes will help Mr. Russell to lower his marginal costs, increasing his profits.

Russell's Shoe Repair Also Produces Custom-Made Shoes