The Message of Marginal Analysis Is to Operate Up to the Quantity

question 122

Multiple Choice

The message of marginal analysis is to operate up to the quantity and price levels where __________.

• A)total revenue equals total cost
• B)break-even revenue equals break-even cost
• C)average revenue equals average cost
• D)price elasticity of demand equals price elasticity of supply
• E)marginal revenue equals marginal cost

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Definitions:

Variable Expense

Costs that change in proportion to the level of production or sales activity.

Contribution Margin Ratio

The percentage of each sales dollar that remains after variable costs have been deducted, indicating how much contributes to fixed costs and profits.

Cost-Volume-Profit Graph

A visual representation that shows the relationship between cost, volume of production, and profit, to analyze how changes in variables affect profits.

Total Revenue

The overall amount of money generated by a business from its activities, such as sales of goods or services, before any expenses are subtracted.