If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward sloping, a decrease in the marginal cost that causes a downward shift of the curve will _________the profit- maximizing number of units undertaken.

Question

If the marginal benefit curve is linear and downward sloping and the marginal cost curve is linear and upward sloping, a decrease in the marginal cost that causes a downward shift of the curve will  _________the profit- maximizing number of units undertaken.

Quizplus · Accepted Answer

A downward shift in the marginal cost curve means that at every level of output, the cost of producing one additional unit has decreased. This means that the marginal costs of producing additional units will now be lower than before the shift. Since the marginal benefit curve is already downward sloping, this decrease in marginal cost will increase the difference between the marginal benefit and marginal cost, leading to an increase in the profit-maximizing number of units undertaken. Therefore, the answer is A, increase.

If the Marginal Benefit Curve Is Linear and Downward Sloping