Answer to Question #70175 in Macroeconomics for Haseeb Khan
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?
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.