The basic logic behind the Rational Rule for Sellers is that acompany owner should increase output as long as the extraoutputmoves the company toward maximum total revenue.O leads to a larger gap between price and average total costs.O leads the company toward minimum average total costs.O adds more to revenue than it adds to costs.

Ration rule for sellers means that the supplier will produce one more unit of good when the P(price) that he gets is equivalent or larger than the MC(marginal cost). a). maximization of TR(total revenue) is not the consideration of producing one more unit of output as the rational supplier makes calculations at margins. Hence, option A is incorrect. b). option B is incorrect as the gap between P and ATC(average total cost) does not correctly represent the criteria for increasing the output. c). minimization of ATC is not the motive for suppliers in all markets, as the seller in monopoly does not operate at minimum point of this curve. d). if the supplier earns more revenue while producing the additional output than its cost, the decision is taken at margin (cost benefit analysis) and hence option D is correct.

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The basic logic behind the Rational Rule for Sellers is that a company owner should increase output as long as the extra output moves the company toward maximum total revenue. leads to a larger gap between price and average total costs. leads the company toward minimum average total costs. adds more to revenue than it adds to costs.

The basic logic behind the Rational Rule for Sellers is that a company owner should increase output as long as the extra output moves the company toward maximum total revenue. leads to a larger gap between price and average total costs. leads the company toward minimum average total costs. adds more to revenue than it adds to costs.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The basic logic behind the Rational Rule for Sellers is that a
company owner should increase output as long as the extra
output
moves the company toward maximum total revenue.
O leads to a larger gap between price and average total costs.
O leads the company toward minimum average total costs.
O adds more to revenue than it adds to costs.

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