A firm produces both X and Y in fixed proportions. A permanent increase in demand for X occurs.
The entrepreneur will increase output of X as long as
the addition to revenue in the X and Y markets combined is greater than the addition to costs.
2 )
the cost of producing more X is offset by a decrease in the cost of producing Y.
3 )
the marginal cost of X is less than the marginal cost of Y.
4 )
there is a fall in average costs of production.
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