Question 1

If average cost is falling, then marginal cost must be falling.

Accepted Answer

A) True 
 B)False  False

Question 2

The difference between economic profit and accountant's definition of profit is that an economist's total cost counts the ____ of inputs.

Accepted Answer

A) absolute value 
B) overheads 
C) opportunity cost 
D) gross cost 
A) absolute value 
B) overheads 
C) opportunity cost 
D) gross cost C

Question 3

A firm that is earning zero economic profit should go out of business.

Accepted Answer

A) True 
 B)False  False

Question 4

If a person who weighs 100 lbs.is riding in an elevator and is joined by a person weighing 120 lbs., what happens to the average weight of persons on the elevator?

Accepted Answer

A) It falls. 
B) It rises. 
C) It stays the same. 
A) It falls. 
B) It rises. 
C) It stays the same.

Question 5

Economic profit of a decision in question equals

Accepted Answer

A) accounting profit of the decision in question + its opportunity cost. 
B) accounting profit of the decision in question − accounting profit of the best available alternative. 
C) accounting profit of the decision in question + its opportunity cost + overheads. 
D) its opportunity cost + accounting profit of the best available alternative. 
A) accounting profit of the decision in question + its opportunity cost. 
B) accounting profit of the decision in question − accounting profit of the best available alternative. 
C) accounting profit of the decision in question + its opportunity cost + overheads. 
D) its opportunity cost + accounting profit of the best available alternative.

Question 6

If the marginal profit from increasing output by one unit is negative, then to attain an optimum the firm should

Accepted Answer

A) increase output until marginal profit equals zero. 
B) reduce output until marginal profit equals zero. 
C) increase output until marginal profit is maximized. 
D) reduce output until marginal profit is maximized. 
A) increase output until marginal profit equals zero. 
B) reduce output until marginal profit equals zero. 
C) increase output until marginal profit is maximized. 
D) reduce output until marginal profit is maximized.

Question 7

Total revenue

Accepted Answer

A) can be calculated directly from the demand curve. 
B) can be calculated directly from the average revenue curve. 
C) is found by multiplying price times quantity. 
D) All of the above are correct. 
A) can be calculated directly from the demand curve. 
B) can be calculated directly from the average revenue curve. 
C) is found by multiplying price times quantity. 
D) All of the above are correct.

Question 8

An airline can profit by offering standby customers an unsold seat at a substantial discount just before takeoff because

Accepted Answer

A) additional passengers are needed to balance the load. 
B) the marginal cost of additional passengers is very small. 
C) additional passengers add little to fixed costs. 
D) such passengers add more to profits than do those with reserved seats. 
A) additional passengers are needed to balance the load. 
B) the marginal cost of additional passengers is very small. 
C) additional passengers add little to fixed costs. 
D) such passengers add more to profits than do those with reserved seats.

Question 9

By definition, a firm that practices satisficing

Accepted Answer

A) maximizes its sales, not its profits. 
B) makes acceptable decisions, though not necessarily optimal ones. 
C) satisfies government guidelines instead of consumer demands. 
D) minimizes the cost of gathering enough information to make an optimal decision. 
A) maximizes its sales, not its profits. 
B) makes acceptable decisions, though not necessarily optimal ones. 
C) satisfies government guidelines instead of consumer demands. 
D) minimizes the cost of gathering enough information to make an optimal decision.

Question 10

Total cost equals average cost multiplied by the quantity of output.

Accepted Answer

A) True 
 B)False

Question 11

Marginal profit equals the difference between marginal revenue and marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

Profit can be maximized only where marginal revenue equals

Accepted Answer

A) average cost. 
B) total cost. 
C) marginal cost. 
D) average cost 
A) average cost. 
B) total cost. 
C) marginal cost. 
D) average cost

Question 13

All business firms should consider their fixed costs in determining the prices they set.

Accepted Answer

A) True 
 B)False

Question 14

In the short run, which are most important in determining changes in output?

Accepted Answer

A) marginal costs and revenue 
B) total costs and revenue 
C) average costs and revenue 
D) fixed costs 
A) marginal costs and revenue 
B) total costs and revenue 
C) average costs and revenue 
D) fixed costs

Question 15

If the marginal profit of the next unit is negative, the firm should produce more output in order to generate greater profit.

Accepted Answer

A) True 
 B)False

Question 16

Total profit is maximized where

Accepted Answer

A) MR = MC. 
B) marginal profit is zero. 
C) the slope of the marginal profit curve is zero. 
D) All of the above are correct. 
A) MR = MC. 
B) marginal profit is zero. 
C) the slope of the marginal profit curve is zero. 
D) All of the above are correct.

Question 17

Figure 8-1  
-Which graph in Figure 8-1 shows a typical firm's total revenue and total cost curves?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
A) (a) 
B) (b) 
C) (c) 
D) (d)

Question 18

For a number of years, General Motors used a pricing strategy designed to maintain at least 40 percent of the American car market.Does this strategy suggest that GM was maximizing profits or pursuing an alternative strategy?

Accepted Answer

Pursuing market share is not the same th

Question 19

Profits will be maximized when the slope of the total revenue curve and the slope of the total cost curve are equal.

Accepted Answer

A) True 
 B)False

Question 20

Total profit = Total revenue − Total cost (including opportunity cost).
Total profit defined in this way is called

Accepted Answer

A) accounting profit. 
B) economic profit. 
C) absolute profit. 
D) relative profit. 
A) accounting profit. 
B) economic profit. 
C) absolute profit. 
D) relative profit.

Exam 8: Output Price and Profit the Importance of Marginal Analysis

If average cost is falling, then marginal cost must be falling.

The difference between economic profit and accountant's definition of profit is that an economist's total cost counts the ____ of inputs.

A firm that is earning zero economic profit should go out of business.

If a person who weighs 100 lbs.is riding in an elevator and is joined by a person weighing 120 lbs., what happens to the average weight of persons on the elevator?

Economic profit of a decision in question equals

If the marginal profit from increasing output by one unit is negative, then to attain an optimum the firm should

Total revenue

An airline can profit by offering standby customers an unsold seat at a substantial discount just before takeoff because

By definition, a firm that practices satisficing

Total cost equals average cost multiplied by the quantity of output.

Marginal profit equals the difference between marginal revenue and marginal cost.

Profit can be maximized only where marginal revenue equals

All business firms should consider their fixed costs in determining the prices they set.

In the short run, which are most important in determining changes in output?

If the marginal profit of the next unit is negative, the firm should produce more output in order to generate greater profit.

Total profit is maximized where

Figure 8-1 -Which graph in Figure 8-1 shows a typical firm's total revenue and total cost curves?

For a number of years, General Motors used a pricing strategy designed to maintain at least 40 percent of the American car market.Does this strategy suggest that GM was maximizing profits or pursuing an alternative strategy?

Profits will be maximized when the slope of the total revenue curve and the slope of the total cost curve are equal.

Total profit = Total revenue − Total cost (including opportunity cost). Total profit defined in this way is called

What Is Economics

The Economy Myth and Reality

The Fundamental Economic Problem Scarcity and Choice

Supply and Demand an Initial Look

Consumer Choice Individual and Market Demand

Demand and Elasticity

Production Inputs and Cost Building Blocks for Supply Analysis

Securities Business Finance and the Economy the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power Regulation and Antitrust

The Case for Free Markets the Price System

The Shortcomings of Free Markets

Externalities the Environment and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship the Human Inputs

Poverty Inequality and Discrimination

Is Us Economic Leadership Threatened

International Trade and Comparative Advantage

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