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 as?
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