Ms. Joplin sells colored pencils. The colored-pencil industry is competitive. Ms. Joplin hires a business consultant to analyze her company's financial records. The consultant recommends that Ms. Joplin increase her production. The consultant must have concluded that, at her current level of production, Ms. Joplin's

Question

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In a competitive market, the recommendation to increase production implies that the additional revenue from selling one more unit (marginal revenue) is greater than the additional cost of producing that one more unit (marginal cost). This is because increasing production would only be profitable if the revenue from selling additional units exceeds the cost of producing those units.

Ms Joplin Sells Colored Pencils