An increase in the demand for a firm's output ?
Correct answer: C. increases the prosperity of both the firm and the factors hired by the firm.
- A. decrease the prosperity of the firm but increases the prosperity of the factors hired by the firm
- B. decreases the prosperity of both the firms and the factors hired by the firm.
- C. increases the prosperity of both the firm and the factors hired by the firm.
- D. increases the prosperity of the firm but decreases the prosperity of the factors hired by the firm.
Explanation
Higher demand for the firm's output raises its price and usually increases production, profits, and the value of the marginal products of its inputs. This benefits both the firm and the factors it employs.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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