Maria Alvarez Recently Opened a Clothing Boutique Catering to Women

Multiple Choice

Maria Alvarez recently opened a clothing boutique catering to women aged 20 to 60 who are seeking on-trend fashions at an economical price point. Maria focuses on customer service and offers her customers personal styling advice, closet audits, and a generous return policy. She's developing quite a following and has found that social media is a great way to market her business and showcase new arrivals. Since she orders limited numbers of items in a size range, customers know they must call or stop by the shop if they see something posted on Instagram or Facebook that they'd like to own. Maria sells most of her clothing at full price and only offers a "sale" twice each year. Maria was recently asked to speak with a marketing class about pricing and how to run a profitable business. She was reviewing some information to prepare for the class and wanted to emphasize to the students the importance of identifying fixed costs, variable costs, marginal costs, and marginal revenue as well as their relationship to profitability. Maria planned to demonstrate that profits will be at their highest when

A) marginal costs equal marginal revenue.
B) fixed costs are less than marginal revenue.
C) variable costs are less than fixed costs.
D) marginal revenue equals fixed costs.