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Unformatted text preview: CHAPTER 2—BASIC ECONOMIC RELATIONS MULTIPLE CHOICE 1. An equation is: a. an analytical expressions of functional relationships. b. a visual representation of data. c. a table of electronically stored data. d. a list of economic data. ANS: A 2. Inflection is: a. a line that touches but does not intersect a given curve. b. a point of maximum slope. c. a measure of the steepness of a line. d. an activity level that generates highest profit. ANS: B 3. The breakeven level of output occurs where: a. marginal cost equals average cost. b. marginal profit equals zero. c. total profit equals zero. d. marginal cost equals marginal revenue. ANS: C 4. Incremental profit is: a. the change in profit that results from a unitary change in output. b. total revenue minus total cost. c. the change in profit caused by a given managerial decision. d. the change in profits earned by the firm over a brief period of time. ANS: C 5. The incremental profit earned from the production and sale of a new product will be higher if: a. the costs of materials needed to produce the new product increase. b. excess capacity can be used to produce the new product. c. existing facilities used to produce the new product must be modified. d. the revenues earned from existing products decrease. ANS: B 6. Which of the following short run strategies should a manager select to obtain the highest degree of sales penetration? a. maximize revenues. b. minimize average costs. c. minimize total costs. d. maximize profits. ANS: A 7. If total revenue increases at a constant rate as output increases, marginal revenue: a. is greater than average revenue. b. is less than average revenue. c. is greater than average revenue at low levels of output and less than average revenue at high levels of output. d. equals average revenue. ANS: D 8. The comprehensive impact resulting from a decision is the: a. gain or loss associated with a given managerial decision. b. change in total cost. c. change in total profit. d. incremental change. ANS: D 9. Total revenue is maximized at the point where: a. marginal revenue equals zero. b. marginal cost equals zero. c. marginal revenue equals marginal cost. d. marginal profit equals zero. ANS: A 10. If P = $1,000 - $4Q: a. MR = $1,000 - $4Q b. MR = $1,000 - $8Q c. MR = $1,000Q - $4 d. MR = $250 - $0.25P ANS: B 11. Total cost minimization occurs at the point where: a. MC = 0 b. MC = AC c. AC = 0 d. Q = 0 ANS: D 12. Average cost minimization occurs at the point where: a. MC = 0 b. MC = AC c. AC = 0 d. Q = 0 ANS: B 13. The slope of a straight line from the origin to the total profit curve indicates: a. marginal profit at that point. b. an inflection point. c. average profit at that point....
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This note was uploaded on 03/08/2011 for the course ECONABA 635 taught by Professor Leiter during the Summer '10 term at Andrew Jackson.
- Summer '10