Question 1

If marginal revenue and marginal cost are not equal, profit can be maximized by

Accepted Answer

A) increasing output if MR > MC. 
B) decreasing output if MC > MR. 
C) moving to the output where the slopes of TR and TC are equal. 
D) All of the above are correct. 
A) increasing output if MR > MC. 
B) decreasing output if MC > MR. 
C) moving to the output where the slopes of TR and TC are equal. 
D) All of the above are correct.

Question 2

Marginal revenue equals the change in total revenue that is earned by selling one more unit of output.

Accepted Answer

A) True 
 B)False

Question 3

At a profit-maximizing output level,

Accepted Answer

A) marginal revenue minus marginal cost equals zero. 
B) marginal profit equals zero. 
C) the slope of the total profit curve is zero. 
D) All of the above are true. 
A) marginal revenue minus marginal cost equals zero. 
B) marginal profit equals zero. 
C) the slope of the total profit curve is zero. 
D) All of the above are true.

Question 4

Firms can make decisions using marginal analysis even if they do not know the shape of a demand curve.

Accepted Answer

A) True 
 B)False

Question 5

In the case study discussed in the chapter, the electronics firm was actually enhancing its profits by selling calculators at a price that was below average cost.

Accepted Answer

A) True 
 B)False

Question 6

Marginal profit is the additional profit that accrues to the firm when the output rises by one unit.

Accepted Answer

A) True 
 B)False

Question 7

If a firm's marginal profit is negative, it should reduce its output level.

Accepted Answer

A) True 
 B)False

Question 8

The demand curve for a firm's product is also the curve showing

Accepted Answer

A) total revenue. 
B) marginal revenue. 
C) average revenue. 
D) average profits. 
A) total revenue. 
B) marginal revenue. 
C) average revenue. 
D) average profits.

Question 9

Firms may reasonably make a decision to cut prices if

Accepted Answer

A) profits are not likely to decline. 
B) marginal profit is not negative. 
C) MR > MC. 
D) All of the above are correct. 
A) profits are not likely to decline. 
B) marginal profit is not negative. 
C) MR > MC. 
D) All of the above are correct.

Question 10

Average cost

Accepted Answer

A) is always larger than marginal cost. 
B) declines for some range of output, hits a minimum, and then increases. 
C) is always smaller than marginal cost. 
D) is total cost/price of the product. 
A) is always larger than marginal cost. 
B) declines for some range of output, hits a minimum, and then increases. 
C) is always smaller than marginal cost. 
D) is total cost/price of the product.

Question 11

Explain the rules for finding maximum profit using total revenue and total cost and marginal revenue and marginal cost.

Accepted Answer

Maximum profit is where total revenue ex

Question 12

Table 8-1
  
-The firm described in Table 8-1 has a fixed cost of ____ at its optimal level of output.

Accepted Answer

A) 2 
B) 6 
C) 10 
D) 26 
A) 2 
B) 6 
C) 10 
D) 26

Question 13

Some companies follow a strategy of sales maximization.They say that this puts them in close touch with their customers and they can better track the market, responding to needs more quickly.However, this increases costs because of the need to stock a wider variety of parts and sizes and colors, etc.What would make this strategy a profit-maximizing one?

Accepted Answer

The increase in reve

Question 14

Total revenue cannot be derived from the demand curve or a demand schedule.

Accepted Answer

A) True 
 B)False

Question 15

If a profit-maximizing firm's fixed cost of producing widgets falls,

Accepted Answer

A) its total cost curve is unaffected. 
B) its marginal cost curve shifts down. 
C) the firm will produce more widgets. 
D) the firm's average profit per widget produced rises. 
A) its total cost curve is unaffected. 
B) its marginal cost curve shifts down. 
C) the firm will produce more widgets. 
D) the firm's average profit per widget produced rises.

Question 16

Total profit

Accepted Answer

A) is the difference between sales revenue and costs. 
B) maximization is always the goal of every firm. 
C) is always defined the same by both economists and accountants. 
D) is maximized when sales are maximized. 
A) is the difference between sales revenue and costs. 
B) maximization is always the goal of every firm. 
C) is always defined the same by both economists and accountants. 
D) is maximized when sales are maximized.

Question 17

Thomas Edison once said that he began making real profit on light bulbs when he dumped his surplus on the European market at less than the "cost of production." From this we can deduce Edison

Accepted Answer

A) did not want to maximize profit. 
B) understood the difference between marginal and average cost. 
C) had a different definition of the term "profit." 
D) did not understand the difference between fixed and variable cost. 
A) did not want to maximize profit. 
B) understood the difference between marginal and average cost. 
C) had a different definition of the term "profit." 
D) did not understand the difference between fixed and variable cost.

Question 18

Marginal, average, and total figures are bound together.If any two are known, the third can be calculated.

Accepted Answer

A) True 
 B)False

Question 19

A firm can always increase its output by one unit at a marginal cost of $10.Its marginal cost curve is

Accepted Answer

A) a horizontal line. 
B) a vertical line. 
C) a ray with slope equal to 10. 
D) exactly one-tenth as steep as its total cost curve. 
A) a horizontal line. 
B) a vertical line. 
C) a ray with slope equal to 10. 
D) exactly one-tenth as steep as its total cost curve.

Question 20

The term "satisficing" for decision-making behavior by many firms was coined by

Accepted Answer

A) Milton Friedman. 
B) Adam Smith. 
C) Herbert Simon. 
D) Alan Greenspan. 
A) Milton Friedman. 
B) Adam Smith. 
C) Herbert Simon. 
D) Alan Greenspan.

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

If marginal revenue and marginal cost are not equal, profit can be maximized by

Marginal revenue equals the change in total revenue that is earned by selling one more unit of output.

At a profit-maximizing output level,

Firms can make decisions using marginal analysis even if they do not know the shape of a demand curve.

In the case study discussed in the chapter, the electronics firm was actually enhancing its profits by selling calculators at a price that was below average cost.

Marginal profit is the additional profit that accrues to the firm when the output rises by one unit.

If a firm's marginal profit is negative, it should reduce its output level.

The demand curve for a firm's product is also the curve showing

Firms may reasonably make a decision to cut prices if

Average cost

Explain the rules for finding maximum profit using total revenue and total cost and marginal revenue and marginal cost.

Table 8-1 -The firm described in Table 8-1 has a fixed cost of ____ at its optimal level of output.

Total revenue cannot be derived from the demand curve or a demand schedule.

If a profit-maximizing firm's fixed cost of producing widgets falls,

Total profit

Thomas Edison once said that he began making real profit on light bulbs when he dumped his surplus on the European market at less than the "cost of production." From this we can deduce Edison

Marginal, average, and total figures are bound together.If any two are known, the third can be calculated.

A firm can always increase its output by one unit at a marginal cost of $10.Its marginal cost curve is

The term "satisficing" for decision-making behavior by many firms was coined by

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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