Multiple Choice
Which of the following tests of competitive advantage is probably the easiest test to pass in a competitive market?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Which situation best illustrates a business increasing its productivity?
A
A firm reduces its working hours, resulting in less total output.
B
A company hires more workers to increase total output, but output per worker remains unchanged.
C
A business raises the price of its product to increase total revenue.
D
A factory produces more output with the same amount of inputs by adopting new technology.
Verified step by step guidance1
Understand the concept of productivity: Productivity measures the efficiency of production and is typically defined as output per unit of input, such as output per worker or output per hour worked.
Analyze each option by comparing output relative to inputs: For example, if output increases while inputs remain the same, productivity has increased.
Evaluate the first option: Reducing working hours leads to less total output, so output per hour might stay the same or change, but total output decreases, which does not clearly indicate increased productivity.
Evaluate the second option: Hiring more workers increases total output, but if output per worker remains unchanged, productivity per worker has not increased.
Evaluate the fourth option (correct answer): Producing more output with the same amount of inputs means output per input unit has increased, which directly illustrates an increase in productivity.
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