How much revenue a firm brings in by improving the quality of a product such that more consumers want to buy it depends on which two factors?
A)The decrease in demand caused by the increase in quality and the incremental profit earned on each additional unit sold
B)The increase in demand caused by the increase in quality and the incremental profit earned on each additional unit sold
C)The increase in demand caused by the increase in quality and the incremental loss on each additional unit sold
D)The decrease in demand caused by the increase in quality and the incremental loss on each additional unit sold
E)The quality of changes to the original product and the decrease in demand cause by the changes in quality

Question

Quizplus · Accepted Answer

When a firm improves the quality of a product, it can attract more consumers to buy it, leading to an increase in demand. With an increase in demand, the firm can sell more units and generate more revenue. Additionally, if the increase in quality leads to a higher price, the firm can earn incremental profit on each additional unit sold. Therefore, the two factors that determine how much revenue a firm brings in by improving the quality of a product are the increase in demand caused by the increase in quality and the incremental profit earned on each additional unit sold.

How Much Revenue a Firm Brings in by Improving the Quality