1) Changes in sales cause changes in profits. Would the profit change associated with sales changes be larger or smaller if a firm increased its operating leverage? Explain your answer.

2) Would each of the following increase, decrease, or have an indeterminant effect on a firm's break-even point (unit sales):

1. The sales price increases with no change in unit costs.
2. An increase in fixed costs is accompanied by a decrease in variable costs.
3. A new firm decides to use MACRS depreciation for both book and tax purposes rather than the straight-line depreciation method.
4. Variable labor costs decline; other things are held constant.