Consider a BMW automobile plant. If the price of BMWs increase by 10 percent and the money wage rate and other costs , there will be .
A) increase by 10 percent; an increase in BMWs profits
B) do not change; an increase in BMW's production and profit
C) do not change; no change in production
D) increase by 10 percent; an increase in BMWs production

Question

Quizplus · Accepted Answer

If the price of BMWs increases by 10 percent while the money wage rate and other costs remain unchanged, BMW's production and profit will increase because the higher price increases revenue without increasing costs, thus improving profitability and incentivizing higher production.

Consider a BMW Automobile Plant