A manager of a clothing firm is deciding whether to add another factory in addition to one already in production.The manager would compare
A)The total revenue gained from the two factories to the total costs of running the two factories.
B)The marginal revenue expected from the second factory to the total costs of running the two factories.
C)The marginal revenue expected from the second factory to the marginal cost of the second factory.
D)The total revenue gained from the two factories to the marginal costs of running the two factories.

Question

​A manager of a clothing firm is deciding whether to add another factory in addition to one already in production.The manager would compare
A)​The total revenue gained from the two factories to the total costs of running the two factories.
B)The marginal revenue expected from the second factory to the total costs of running the two factories.
C)The marginal revenue expected from the second factory to the marginal cost of the second factory.
D)​The total revenue gained from the two factories to the marginal costs of running the two factories.

Quizplus · Accepted Answer

The manager should compare the marginal revenue expected from the second factory to the marginal cost of the second factory. This will ensure that the cost of producing the additional goods is less than the revenue generated from selling them. Comparing total revenue and total costs would not account for the expenses and revenue generated by each individual factory. Comparing marginal revenue to total costs would not account for the specific costs and revenue associated with the second factory. Comparing total revenue to marginal costs would not account for the specific revenue generated by the second factory.

​A Manager of a Clothing Firm Is Deciding Whether to Add

A Manager of a Clothing Firm Is Deciding Whether to Add