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CHAPTER 2—BASIC ECONOMIC RELATIONS
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.
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.
3. The breakeven level of output occurs where:
a. marginal cost equals average cost.
b. marginal profit equals zero.
total profit equals zero.
d. marginal cost equals marginal revenue.
4. Incremental profit is:
the change in profit that results from a unitary change in output.
b. total revenue minus total cost.
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.
5. The incremental profit earned from the production and sale of a new product will be higher if:
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.
6. Which of the following short run strategies should a manager select to obtain the highest degree of
a. maximize revenues.
b. minimize average costs.
c. minimize total costs.
d. maximize profits.
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7. If total revenue increases at a constant rate as output increases, marginal revenue:
is greater than average revenue.
b. is less than average revenue.
is greater than average revenue at low levels of output