The output expansion effect of the sale of a firm's last ΔQ units of output is:
A) the additional revenue from selling ΔQ units at price P(Q).
B) the reduced revenue from selling (Q - ΔQ) units at a lower price of P(Q).
C) the additional revenue from selling ΔQ units at price P(Q + ΔQ).
D) the reduced revenue from selling (Q - ΔQ) units at a lower price of P(Q - ΔQ).

Question

Quizplus · Accepted Answer

The output expansion effect refers to the additional revenue earned by a firm by selling its last units of output. This can be calculated by multiplying the price at which the last units of output were sold (P(Q)) by the quantity sold (ΔQ). Therefore, the correct answer is A. The other options involve either selling a lower quantity of output or a different price, which is not relevant to the output expansion effect.

The Output Expansion Effect of the Sale of a Firm's