A firm can profitably introduce a new activity if and only if:
A) the activity's direct benefit exceeds its opportunity cost.
B)the activity's direct benefit equals its opportunity cost.
C) all the constraints become nonbinding.
D) the slope of the resource constraint equals the slope of the objective function.
E) the shadow price of any one of the resources becomes zero.

Question

Quizplus · Accepted Answer

A firm can profitably introduce a new activity only if the direct benefit from the activity is greater than or equal to its opportunity cost. In order to make a profit, the firm must receive more revenue from the new activity than it costs in terms of resources, time, and effort. Therefore, if the direct benefit exceeds the opportunity cost, the firm can make a profit and introduce the activity.

A Firm Can Profitably Introduce a New Activity If and Only