For this question,assume that firms experience an increase in sales.We would expect that this increase in sales will cause
A)an increase in profit per unit of capital.
B)a decrease in profit per unit of capital.
C)no change in profit per unit of capital.
D)ambiguous effects on profit per unit of capital.
E) none of the above

Question

Quizplus · Accepted Answer

With an increase in sales, firms should be able to spread their fixed costs over a larger number of units, leading to an increase in profit per unit of capital. This is because the cost per unit of producing the good goes down as the fixed costs are spread over a larger number of units.

For This Question,assume That Firms Experience an Increase in Sales