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QUESTION

"Productivity growth lets companies boost profits even as output prices fall." Assume that productivity growth refers to marginal product of an input....

"Productivity growth lets companies boost profits even as output prices fall." Assume that productivity growth refers to marginal product of an input.

(a) Explain how a firm can increase profits even when the market price of its output is falling. Your explanation should refer to marginal productivity theory and please give a current example.

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