After selling 1,000 three-ring binders, Tony DiFulvio realizes that the marginal revenue from selling the last binder was less than the marginal cost.From this we can conclude that
A)Tony's business earns a short-run economic profit.
B)Tony should shut down his business temporarily.
C)Tony's profit fell after selling his 1,000th three-ring binder.
D)Tony's profit would be greater if he sold an additional three-ring binder.

Question

Quizplus · Accepted Answer

The marginal revenue from selling the last binder is the additional revenue earned from selling one more unit. If the marginal revenue is less than the marginal cost, it means that the cost of producing one more unit is greater than the revenue earned, resulting in a decrease in profit. Therefore, we can conclude that Tony's profit fell after selling his 1,000th three-ring binder. Option A is incorrect as marginal revenue being less than marginal cost means the opposite of earning an economic profit. Option B is incorrect since Tony should not shut down his business because of one unprofitable sale. Option D is incorrect because the marginal profit of the last binder is negative, which means his profit would decrease if he sold another three-ring binder.

After Selling 1,000 Three-Ring Binders, Tony DiFulvio Realizes That the Marginal