After selling 1000 three-ring binders, Tony DiFulvio realises 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 1000th three-ring binder.
D)Tony's profit would be greater if he sold an additional three-ring binder.

Question

Quizplus · Accepted Answer

When the marginal revenue is less than the marginal cost, it means that the cost of producing one more unit is greater than the revenue generated from selling that unit. Therefore, it is likely that Tony's profit fell after selling his 1000th binder. Option A is incorrect because if Tony was earning a short-run economic profit, then the marginal revenue should have been greater than the marginal cost. Option B is also incorrect because shutting down his business temporarily would not necessarily solve the problem of falling profits. Option D is incorrect because if the marginal revenue is less than the marginal cost, then selling an additional binder would lead to even lower profits.

After Selling 1000 Three-Ring Binders, Tony DiFulvio Realises That the Marginal