Suppose that a firm successfully introduces a highly profitable new product. If this new product offers less marginal utility per unit to consumers than existing substitute products, then the
A)laws of economics have been violated.
B)new product must have increasing, not diminishing, marginal utility.
C)existing products were being produced at a loss.
D)new product has a lower price than the existing substitute products.

Question

Quizplus · Accepted Answer

The new product having a lower price than existing substitute products can explain its high profitability despite offering less marginal utility per unit. Consumers may prefer it due to its cost-effectiveness, making it a successful product despite its lower marginal utility.

Suppose That a Firm Successfully Introduces a Highly Profitable New