Exam 5: The Behavior of Firms

The government authorized $10 million to build bridges on an interstate.After $8 million were spent,serious engineering flaws were discovered.At that point,experts testified that the government must authorize another $10 million in funding to make the bridges safe,bringing the project's total cost to $20 million.The government should authorize the additional funding as long as the benefits from the completed bridges exceed

Explain why a rent increase at Joe's Rib Shack would not cause Joe to raise his prices,but a rent increase at Joe's competitors may cause him to raise prices.

Fixed costs have no effect on a firm's profit.

Demand and Total Cost of Production The following questions refer to the following tables which show the demand for a firm's product and the firm's total cost of production. -Refer to Demand and Total Cost of Production.The marginal revenue received from selling the fourth unit is

A firm is currently producing at a level where its MC = 10 and its MR = 5.We can conclude that this firm is

This firm's fixed costs are

If a firm increases production from 120 units to 130 units,then its Marginal Revenue is 10.

When the price of fabric falls,it does not benefit a clothing manufacturer to lower its prices since that will only reduce its profit margin.

What do economists mean by the phrase "sunk costs are sunk"?

Firms are so diverse in size and organization that it is not possible to make any general statements about their behavior.

If this firm produces 5 units of output,then its total cost equals

Mike,of Mike's Machines has hired a consultant who informs Mike that since the total revenue from current operations exceeds total cost,he should consider increasing production of machines.Mike would be best off if he

If 1,000 yards of denim can produce 10,000 pairs of jean,then 2,000 yards of denim can produce 20,000 pairs of jeans and 30,000 yards of denim can produce 30,000 pairs of jeans.

An increase in fixed costs will lower a firm's

Since Marginal Revenue measures the additional revenue generated by selling one more unit of the product,it must always be positive.

Suppose a new Dunkin' Donuts shop has opened in town.Its main competitor,Doughnut Delite,will likely