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A student organization bought a soft-drink machine for use in a student area. There was considerable discussion over whether they should set the machine to charge 50¢, 75¢, or $1 per drink. The organization recognized that the number of soft drinks sold would depend on the price charged. Eventually the decision was made to charge 75¢. Their criterion was:_______

a. Minimize input
b. Maximize output
c. Maximize the difference between output and input
b. None of the above

Respuesta :

Answer:

c. Maximize the difference between output and input

Explanation:

The objective in determining the price or price change is not just to maximize output neither is it to minimize input only. Instead the objective must take both the input as well as the output into consideration. It means the objective is to increase profit by ensuring that the Marginal Revenue (MR) = Marginal Cost (MC).

Marginal cost represents the cost incurred for selling one extra unit of a product while the Marginal Revenue represents the gain or benefit of selling an extra or additional unit of a product. Profit should be maximized and as such, the objective is to maximize the difference between the output (revenue) and input (cost).

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