Practice Quiz

AP Economics Exam Prep

Category - Economics

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A profit-maximizing company that manufactures sports clothing wants to spend $25 million to have a professional athlete appear in commercials for its clothing. Which of the following is the best economic reason for the company to spend the money?
  1. The company sells $25 million worth of clothing per year.
  2. The company could cover the cost of the athlete's contract with profits from previous years.
  3. The additional revenue generated by the commercials would be greater than the additional costs of producing the clothing.
  4. The additional revenue generated by the commercials would be greater than $25 million plus the costs of producing the additional clothing.
Explanation
Answer: D - The additional revenue generated by the commercials would be greater than $25 million plus the costs of producing the additional clothing.
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