As output rises,the profit effect results from
A)Lower opportunity costs.
B)Tight supplies of factors of production.
C)The law of demand.
D)Constant costs that do not rise when prices rise.

Question

Quizplus · Accepted Answer

The profit effect occurs when constant costs do not rise even as output increases, resulting in higher profits. Option A is not correct because the concept of opportunity costs does not apply to the profit effect. Option B is also not correct as tight supplies of factors of production would lead to higher costs and lower profits, which is opposite of the profit effect. Option C is not correct as the law of demand deals with price and quantity demanded, which is not related to the profit effect.

As Output Rises,the Profit Effect Results from