If one defines incremental cost as the change in total cost resulting from a decision, and incremental revenue as the change in total revenue resulting from a decision, any business decision is profitable if:
a. it increases revenue more than costs or reduces costs more than revenue
b. it decreases some costs more than it increases others (assuming revenues remain constant)
c. it increases some revenues more than it decreases others (assuming costs remain constant)
d. all of the above
e. b and c only
d
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The level of real GDP the economy produces at full employment is
A) never reached in reality. B) nominal GDP. C) called the Lucas level. D) real GDP. E) potential GDP.
Behavioral economists believe in modifying the assumption that people are rational and follow their own self-interest.
Answer the following statement true (T) or false (F)
When the relationship between two variables changes,
A. The curve becomes linear. B. There is movement from one point on the curve to another point on the curve. C. The entire curve shifts. D. All of the choices are correct.
Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower