Owners of firms understand that lower prices will attract more customers. Why can firms not always reduce prices until they increase sales and profits?

A. Consumers do not always like low prices.

B. If marginal production costs exceed marginal revenues, the firm will suffer losses, not profits.

C. If opportunity cost for the consumers exceeds the firm's production costs, there can be no profit.

D. Owners will never reduce prices even when it means increased profits.

Question

Social Studies

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24 January, 02:03

Owners of firms understand that lower prices will attract more customers. Why can firms not always reduce prices until they increase sales and profits?

A. Consumers do not always like low prices.

B. If marginal production costs exceed marginal revenues, the firm will suffer losses, not profits.

C. If opportunity cost for the consumers exceeds the firm's production costs, there can be no profit.

D. Owners will never reduce prices even when it means increased profits.

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Answers (1)

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Hadley Potts · Answer 1

The reason that firms cannot always reduce prices until they increase sales and profits is the cost of marginal production costs. If marginal production costs exceed marginal revenues, the firm will suffer losses, not profits. The answer to your question is B.