Johnson & Johnson managers have shifted production from an Aloe Vera based hand cream to an Oat based one. The cost of the shift has increased by 12%. What is this phenomenon referred to:
A)law of increasing costs
B)law of decreasing sales
C)product diversification
D)product integration

Question

Quizplus · Accepted Answer

This is referred to as the law of increasing costs.
Key Takeaway: The law of increasing costs dictates that when a company shifts production from one product to another, costs of production increase. Part of the reason for this increase is due to declining productivity.

Johnson & Johnson Managers Have Shifted Production from an Aloe