Question

If marginal cost becomes higher than price, what happens to a company?

A. The company will lose money on each additional unit produced

B. Company specialization will lower the actual price changed

C. Diminishing margininal returns will shrink

D. The company will go out of business

Answer 1

A ,,,,,,,,,,,,,,,,,,,,,,,,, GRADPOINT

Answer 2

A is the correct answer.

If marginal cost is higher than the price that a company is charging, then the firm will lose money until it adjusts the price of the item to reflect the change in marginal cost. Price should always be higher than marginal cost, unless the firm is putting in place a strategy to drive competitors out and then reestablish pricing schemes.