Extent (How Much) Decisions

Question 1

Average costs are irrelevant to

Answer 1

an extent decision

Question 2

Average costs hide fixed cost by

Answer 2

combining them together with variable costs

Question 3

If marginal costs is above the average,

Answer 3

then the average increases with output.

Question 4

Marginal analysis is the process of

Answer 4

breaking down decisions into small steps and computing the costs and benefits of taking another step.

Question 5

Marginal Cost (MC)

Answer 5

is the additional cost incurred by producing and selling one more unit.

Question 6

Marginal Revenue (MR) is

Answer 6

the additional revenue gained from selling one more unit.

Question 7

MR > MC,

Answer 7

then sell more

Question 8

MR < MC,

Answer 8

then sell less

Question 9

MR = MC,

Answer 9

selling the right amount (max profit)

Question 10

The difficulty applying marginal analysis

Answer 10

is measuring the marginal costs and benefit of an additional step.

Question 11

Customer acquisition is the cost of change

Answer 11

divided by new customers

Question 12

Marginal analysis only points you in the right direction because

Answer 12

marginal cost and benefit have to be recomputed after each step.

Question 13

Shirking is the decision to

Answer 13

yield the highest value, low cost goods

Question 14

Incentive pay leads to

Answer 14

inequality among workers

Question 15

Incentive pay criticisms mistake

Answer 15

procedural fairness with outcome equality

Question 16

Incentive compensation increases

Answer 16

marginal revenue or reduces cost will increase effort.

Question 17

Good incentive compensations

Answer 17

scheme linked pay to performance that reflect effort.