Scenario 1-2
Suppose a hat manufacturer currently sells 2,000 hats per week and makes a profit of $5,000 per week. The plant owner observes, "Although the last 300 hats we produced and sold increased our revenue by $1,000 and our costs by $1,100, we are still making an overall profit of $5,000 per week so I think we're on the right track. We are producing the optimal number of hats."
-Refer to Scenario 1-2.Using marginal analysis terminology, another economic term for the incremental cost of producing the last 300 hats is

Question

Quizplus · Accepted Answer

The incremental cost of producing the last 300 hats is referred to as the marginal cost. This is the cost of producing one additional unit of output. The plant owner's observation suggests that despite the increase in both revenue and costs from producing the last 300 hats, the overall profit remains the same, indicating that the marginal revenue from these hats was equal to their marginal cost. Therefore, the best choice is A) marginal cost.

Scenario 1-2 Suppose a Hat Manufacturer Currently Sells 2,000 Hats Per Week