Question

The market price for wallets is $20. Your technology is such that at your most efficient production point, the average total cost of producing a wallet is $2.50. Your manager runs into your office and shouts, "Boss!!! Average costs are rising!! Average costs are rising!!" To make a profit-maximizing decision, you should:

Answer 1

By asking the manager about the marginal cost.

Step-by-step explanation:

When a business wants to make profit it decides the production level that gives maximum revenue at lowest cost. that is, the business maximize profit and maximize revenue at a lower cost.

The manager should ask for the marginal cost of production, since t there will be a rise in average cost

A marginal cost can be defined as the extra cost incurred for producing an extra unit of a product.

To achieve maximize profit the manager needs to get a production level at which marginal cost is lowest at highest revenue,

Maximum profit = marginal cost (lowest at highest revenue)

Answer 2

ask the manager about the marginal cost.

Step-by-step explanation:

When a business wants to maximise profit it chooses the level of production that gives maximum revenue at lowest cost. Since the average cost is rising, the manager should ask for the marginal cost of production.

Marginal cost is the extra cost incurred for producing an extra unit of a product.

To maximise profit the manager needs to get a production level at which marginal cost is lowest at highest revenue.