If price is greater than marginal cost and output is infinitely divisible, then
A)decreasing output decreases revenue less than it decreases cost.
B)increasing output increases revenue more than it increases cost.
C)increasing output increases revenue less than it increases cost.
D)decreasing output increases revenue more than it increases cost.
E)increasing output has no effect on revenue and cost.

Question

Quizplus · Accepted Answer

When price is greater than marginal cost and output is infinitely divisible, increasing output will increase revenue more than it increases cost. This is because the additional revenue generated from selling one more unit (price) is greater than the additional cost of producing that unit (marginal cost).

If Price Is Greater Than Marginal Cost and Output Is