Marginal Analysis Flashcards

1
Q

A company has received an offer from a supplier to produce units that the company currently produces and sells. The unit price quoted by the supplier is higher than the company’s variable production cost per unit but lower than the price at which the company can market the units. Under which circumstance would the company’s profits increase by purchasing units from the supplier?

A

Market demand for the product exceeds the company’s capacity.

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