Question 1

Accounting profit is usually larger than economic profit.

Accepted Answer

A) True 
 B)False

Question 2

What rule(s) should a firm follow in deciding optimum output for profit maximization?

Accepted Answer

The firm should expand its output as lon

Question 3

If total profit is at a maximum, then average profit is zero.

Accepted Answer

A) True 
 B)False

Question 4

The optimal number of units to produce is best expressed when:

Accepted Answer

A) ​marginal benefit exceeds marginal cost 
B) ​marginal cost exceeds marginal benefit 
C) ​marginal benefit and marginal cost are close to equal 
D) ​both a and c 
A) ​marginal benefit exceeds marginal cost 
B) ​marginal cost exceeds marginal benefit 
C) ​marginal benefit and marginal cost are close to equal 
D) ​both a and c

Question 5

The goal of the business firm is maximization of ____, and the goal of the consumer is maximization of ____.

Accepted Answer

A) total sales; income 
B) total profit; utility 
C) total output; utility 
D) total sales; utility 
A) total sales; income 
B) total profit; utility 
C) total output; utility 
D) total sales; utility

Question 6

A small business owner who is earning a positive economic profit, no matter how small, is doing better than if she sold her business and went to work for another firm.

Accepted Answer

A) True 
 B)False

Question 7

If your cumulative Grade Point Average (GPA) after two years of college is 3.0, and your grades for the current semester average 3.5, what will happen to your cumulative GPA? Explain the similarity of this example to the case of marginal cost and average cost.

Accepted Answer

If the current semester's GPA is above t

Question 8

Company A manufactures a single automotive component.It had total revenue of $100,000 and an economic profit of $20,000.What is the price of the component it manufactures?

Accepted Answer

A) ($100,000/quantity sold). 
B) ($100,000/quantity produced). 
C) ($100,000/quantity sold) − average cost of the product 
D) ($100,000/quantity produced) − average cost of the product 
A) ($100,000/quantity sold). 
B) ($100,000/quantity produced). 
C) ($100,000/quantity sold) − average cost of the product 
D) ($100,000/quantity produced) − average cost of the product

Question 9

The typical total profit graphical presentation is shown as

Accepted Answer

A) a square. 
B) a rectangle. 
C) a hill, or mound. 
D) an S curve. 
A) a square. 
B) a rectangle. 
C) a hill, or mound. 
D) an S curve.

Question 10

Management gets two numbers (price and quantity) from one decision because

Accepted Answer

A) the marginal utility of goods is fixed. 
B) producers use both technical and financial information. 
C) the demand curve consists of price and quantity pairs. 
D) the average cost curve has only one low point. 
A) the marginal utility of goods is fixed. 
B) producers use both technical and financial information. 
C) the demand curve consists of price and quantity pairs. 
D) the average cost curve has only one low point.

Question 11

Average revenue is equal to

Accepted Answer

A) TR/Q. 
B) (P × Q)/P. 
C) TR × Q 
D) All of the above are correct. 
A) TR/Q. 
B) (P × Q)/P. 
C) TR × Q 
D) All of the above are correct.

Question 12

A firm's total profit is the difference between its sales and what it pays out in costs.

Accepted Answer

A) True 
 B)False

Question 13

Average cost equals total cost multiplied by the number of units of output.

Accepted Answer

A) True 
 B)False

Question 14

If total profit is maximized, then marginal cost must equal marginal revenue.

Accepted Answer

A) True 
 B)False

Question 15

Thomas Edison once complained that he was not making a profit selling light bulbs because his plants were operating 25 percent below capacity.He estimated that he could increase output 25 percent with a 2 percent increase in the cost of production.He sold the 25 percent on the foreign market at a price below what he called the "cost of production." We can deduce that Edison really meant

Accepted Answer

A) Marginal cost was below average cost but less than marginal revenue. 
B) Average cost exceeded variable cost, which exceeded marginal revenue. 
C) Variable cost exceeded fixed cost but was less than marginal revenue. 
D) Marginal cost was above average cost but greater than marginal revenue. 
A) Marginal cost was below average cost but less than marginal revenue. 
B) Average cost exceeded variable cost, which exceeded marginal revenue. 
C) Variable cost exceeded fixed cost but was less than marginal revenue. 
D) Marginal cost was above average cost but greater than marginal revenue.

Question 16

Why is the total profit curve shaped like a hill?

Accepted Answer

If a firm produces nothing, it certainly

Question 17

If the output of a firm is increased by one unit, the revenue addition is called

Accepted Answer

A) total revenue. 
B) average revenue. 
C) marginal revenue. 
D) economic profit. 
A) total revenue. 
B) average revenue. 
C) marginal revenue. 
D) economic profit.

Question 18

The marginal cost of Alexa's Guide to Street People and Their Pets is constant at $5.Alexa sells 5,000 copies per year at $20 per copy.She would like to increase readership and hold total profit constant.If the price goes to $15, how many copies must she sell?

Accepted Answer

A) 10,000 
B) 9,000 
C) 7,500 
D) 6,000 
A) 10,000 
B) 9,000 
C) 7,500 
D) 6,000

Question 19

A firm should keep producing output as long as the marginal profit is greater than zero, no matter how small it is.

Accepted Answer

A) True 
 B)False

Question 20

If fixed cost rises,

Accepted Answer

A) the profit maximizing level of output would decrease. 
B) the profit maximizing level of output would not change. 
C) marginal cost rises. 
D) variable cost falls. 
A) the profit maximizing level of output would decrease. 
B) the profit maximizing level of output would not change. 
C) marginal cost rises. 
D) variable cost falls.

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

Accounting profit is usually larger than economic profit.

What rule(s) should a firm follow in deciding optimum output for profit maximization?

If total profit is at a maximum, then average profit is zero.

The optimal number of units to produce is best expressed when:

The goal of the business firm is maximization of ____, and the goal of the consumer is maximization of ____.

A small business owner who is earning a positive economic profit, no matter how small, is doing better than if she sold her business and went to work for another firm.

If your cumulative Grade Point Average (GPA) after two years of college is 3.0, and your grades for the current semester average 3.5, what will happen to your cumulative GPA? Explain the similarity of this example to the case of marginal cost and average cost.

Company A manufactures a single automotive component.It had total revenue of $100,000 and an economic profit of $20,000.What is the price of the component it manufactures?

The typical total profit graphical presentation is shown as

Management gets two numbers (price and quantity) from one decision because

Average revenue is equal to

A firm's total profit is the difference between its sales and what it pays out in costs.

Average cost equals total cost multiplied by the number of units of output.

If total profit is maximized, then marginal cost must equal marginal revenue.

Why is the total profit curve shaped like a hill?

If the output of a firm is increased by one unit, the revenue addition is called

The marginal cost of Alexa's Guide to Street People and Their Pets is constant at $5.Alexa sells 5,000 copies per year at $20 per copy.She would like to increase readership and hold total profit constant.If the price goes to $15, how many copies must she sell?

A firm should keep producing output as long as the marginal profit is greater than zero, no matter how small it is.

If fixed cost rises,

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

Filters

The goal of the business firm is maximization of , and the goal of the consumer is maximization of .