SU11: Marginal Analysis and Pricing

Question 1

When to make

Answer 1

if the total relevant costs are less than the cost to buy the item

Question 2

When to buy

Answer 2

if the total relevant costs are more than the costs to buy

Question 3

Elasticity of demand

Answer 3

percent change in qty demanded / percent change in price

Question 4

Cost plus markup

Answer 4

Total Cost + (Total Cost x markup percentage)

Question 5

Cost plus absorption markup

Answer 5

Absorption mfg cost + (Absorption mfg cost x markup)

Question 6

Cost plus variable markup

Answer 6

Variable mfg cost + (Variable mfg cost x markup)

Question 7

Cost plus total variable markup

Answer 7

Total variable mfg cost + (total variable mfg cost x markup)

Question 8

Midpoint method for price elasticity of demand

Answer 8

Ed = [(Q1-Q2)/(Q1+Q2)] / [(P1-P2)/(P1+P2)]

Question 9

Economic profit

Answer 9

The excess of revenues over economic costs.

Question 10

If a product has demand elasticity greater than one, then a decrease in price will have a <> effect on total revenue

Answer 10

A decrease in price on an elastic product will increase total revenue because demand will increase by a greater percentage than the increase in price.

Question 11

Essay question - identify the relevant costs

Answer 11

Expected future costs applicable to a particular decision

Costs that will differ between alternatives

Question 12

The change in total product resulting from the use of one unit more of the variable factor is known as

Answer 12

Marginal product

Question 13

The price elasticity of demand is most appropriately defined as the

Answer 13

Change in quantity demanded in relation to a change in price.