When Dealing with a ________,Managers Must Decide Whether to Invest

question 101

Multiple Choice

When dealing with a ________,managers must decide whether to invest in it in an attempt to build it into a star or cash cow,or whether to phase it out.

• A)star
• B)dog
• C)question mark
• D)cash cow
• E)cat

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Definitions:

MC > MR

A condition where the marginal cost of producing an additional unit is greater than the marginal revenue earned from selling it, suggesting a decrease in production might increase profit.

Profit

The financial gain realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes needed to sustain the activity.

MC = MR

This abbreviation stands for the equality of marginal cost (MC) and marginal revenue (MR), a condition for profit maximization in perfectly competitive markets.

Profit

The profit achieved when the income from business operations surpasses all associated expenses, costs, and taxes.