- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 3. Marginal Revenue, Marginal Cost and Profit Maximization
CFA Practice Question
In regard to the relation between output and costs in the short run, a decline in the marginal cost most likely occurs at what level of production?
A. Low output
B. High output
C. Profit-maximizing output
Explanation: Marginal cost, in the short run, decreases at a low level of outputs due to economies from greater specialization. However, at higher levels of production, it eventually increases because of the law of diminishing returns.
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