Marginal analysis is a useful tool in economics and business decision-making. Let's evaluate each of the given statements:
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It gives precise pricing and demand levels.
- False: While marginal analysis helps in understanding how price changes might affect demand and revenue, it does not provide precise pricing or demand levels; it deals with incremental changes.
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It is used to analyze what is known about cost and demand.
- True: Marginal analysis involves examining the additional benefits of a decision compared to the additional costs and is often used to evaluate existing knowledge about both costs and demand.
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Managers avoid it because of its limited ability to predict the demand curve.
- False: Managers do utilize marginal analysis as it provides valuable insights into decision-making, though it does have limitations. It's not generally avoided for inability to predict the demand curve.
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It can narrow down potentially successful pricing levels.
- True: Marginal analysis can help identify optimal pricing levels by analyzing the relationship between marginal cost and marginal revenue, which can reveal potentially successful pricing strategies.
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Managers use it to accurately plot the demand curve.
- False: While managers use marginal analysis to inform their decisions regarding pricing and output, it does not involve directly plotting the demand curve. It provides insights into demand but isn't used to create a precise demand curve.
In summary, the true statements about marginal analysis are:
- It is used to analyze what is known about cost and demand.
- It can narrow down potentially successful pricing levels.