Which of the following actions could increase marginal costs?

Prepare for the Business Admin Knowledge Level 3 Test. Utilize multiple choice questions and helpful insights to strengthen your understanding of core business admin concepts. Excel in your examination!

Hiring additional staff for production can increase marginal costs primarily because it directly affects the cost associated with producing each additional unit of output. When a business hires more employees, the company incurs higher wage expenses. This increase in labor leads to an elevation in the overall production costs, particularly if the hiring does not lead to a proportional increase in productivity.

This situation becomes prominent in scenarios where the existing workforce is already operating at optimal efficiency. In such cases, adding additional staff may not result in equivalent output gains, leading to a higher cost for producing each subsequent unit. The marginal cost, which is defined as the cost of producing one more unit, could thus rise due to the increased labor costs without a corresponding increase in output.

Investing in automation and implementing cost-saving measures typically work to reduce costs and can enhance efficiency, leading to potentially lower marginal costs. Selling more units at the same price often indicates a higher total revenue without an equivalent increase in costs, which generally serves to decrease the marginal cost per unit sold. Consequently, these actions don't align with the scenario of increasing marginal costs.

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