Suppose you are deciding whether or not to increase production. You are currently making a profit. If you produce one more unit, your increase in cost will be $10, your average variable costs will increase to less than that, and your average fixed costs will decrease. Finally, your average revenue will increase to $10, but your increase in revenue will be $9. You should
A. increase production by at least 1 unit.
B. redo the math associated with decreasing production because that may result in greater profit.
C. increase production by exactly 1 unit.
D. leave production unchanged because profit is maximized where you are.
Answer: B
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