24 Questions
What is the process of finding the maximum and minimum point of a function called?
Optimization
In a price-output decision-making problem, the objective may be to determine the output level that maximizes:
Profits
What is the goal in a production problem according to the given text?
Minimize cost of producing a desired level of output
What is involved in normative economic decision analysis according to the text?
Determining the action that best achieves a desired goal or objective
What does the Second-Derivative Test for Optimum determine?
Maximum and minimum points of a function
What is the first order condition for optimization?
Finding the critical points by setting the first order derivative to zero
What is the process of finding the combination of inputs (resources) that minimizes the cost of producing a desired level of output called?
Constrained Optimization
What is the first order derivative used for in optimization?
Finding the rate of change of a function
What makes the first order condition for optimization sufficient to indicate an optimal point?
First Derivative Test
When is a point considered to be a maximum according to the First Derivative Test?
If the first derivative changes from positive to negative
According to the Second-Derivative Test, when is a point considered to be a maximum?
If the second derivative is less than 0
What can be done if the sign of the second order derivative is not known?
Resort to the first order derivative test
What does the first order condition for optimization help find?
Critical points / stationary points
"If f’(x) has the same sign on both the immediate left and immediate right of point x*, it is neither maximum nor a minimum." What does this statement imply?
"V" shaped curves have no maximum or minimum points
What is the condition used to find the critical points or stationary points in optimization?
First order condition
Which test is used to determine if a point is a maximum or minimum according to the first order derivative test?
First Derivative Test
What does the second order derivative test determine about a point?
Both of the above
When is a point considered to be neither a maximum nor a minimum according to the First Derivative Test?
When the first derivative has the same sign on both sides of the point
What should be done if the sign of the second order derivative is not known when testing for optimality?
Resort to the First Derivative Test
What does normative economic decision analysis involve?
Determining the action that best achieves a desired goal or objective
What is the main goal in a capital budgeting problem?
Selecting projects that maximize the net present value of the investments chosen
What is the process of finding the maximum and minimum point of a function called?
Optimization
In a production problem, what is the goal related to the combination of inputs?
Finding the combination of inputs that minimizes the cost of producing a desired level of output
What is involved in solving normative economic decision analysis problems?
Determining the action that best achieves a desired goal or objective
Test your knowledge of differential calculus and optimization with this quiz covering first and second order condition tests, Nth derivative tests, single and multi-variable function optimization, and various optimization techniques and methods.
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