- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 12. Topics in Demand and Supply Analysis
- Subject 6. 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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