Question

The marginal benefit of an additional beach towel is $12. The marginal cost of producing an additional beach towel is $8. If producers are minimizing the average costs of production, then we can conclude: A. beach towel production is both allocatively and productively efficient.B. beach towel production is allocatively efficient but not productively efficient. C. beach towel production is neither allocatively nor productively efficient. D. beach towel production is not allocatively efficient but is productively efficient.

Answer 1

Answer:

The correct answer is: D. beach towel production is not allocatively efficient but is productively efficient.

Explanation:

Production costs are the night terror that keeps many business owners awake. These costs seem to have a mind of their own and the only solution is to keep track of them to keep them under control. A successful entrepreneur must find a way to operate his business efficiently and profitably to always be aware of production costs. And for this, it is best to track expenses to see if labor, materials or overhead are exceeding the amounts allocated in a budget at each stage of production.