Answer to Question #70175 in Macroeconomics for Haseeb Khan

Question

Three managers of the Unilever Pakistan are discussing a possible increase in production. Each suggests a way to make this decision.
Kashif: We should examine whether our company’s productivity—gallons of potion per worker—would rise or fall.
Jamal: We should examine whether our average cost—cost per worker— would rise or fall.
Ahmad: We should examine whether the extra revenue from selling the additional potion would be greater or smaller than the extra costs.
Who do you think is right? Why?

Answer 1

If three managers of the Unilever Pakistan are discussing a possible increase in production, then Ahmad is right, because he suggests to use profit-maximization rule, according to which MR = MC.