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

Figure 8-2 -Figure 8-2 shows a manufacturer's total profit curve.To maximize her total profit, the manufacturer should produce ____ units of output.

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

To find its profit-maximizing output level, a firm should operate where

Economists assume that business firms have many goals, and profit maximization is just one of them.

Net benefit is equal to total benefit minus marginal cost.

Using marginal analysis, explain why many restaurants and coffee shops offer low-cost refills on beverages (for example, a shop may charge $1.50 for a cup of coffee and only $.50 for a refill).

Do firms really seek to maximize profits?

Marginal profit is the profit

Why assume that firms maximize profit, when it is easy to find companies that pursue other goals such as saving rain forests (Ben and Jerry's) and sponsoring Mister Rogers (Sears)?

A firm has $200,000 to spend on either direct sales or advertising.Suppose further that if the $200,000 is spent on direct sales, it will bring in an accounting profit of $40,000.Instead, the (accounting) profit it could obtain from a $200,000 investment in advertising is $X.Compare the profitability of the two options if (a) X = 50,000, (b) X = 30,000, or (c) X = 40,000.

Firms need to know the shape of a demand curve to use marginal analysis.

Profit maximization occurs when MC = MR.

A firm that decides to make a price cut assumes that marginal profit is negative.

According to the text, when management selects a price or quantity, it also selects the other.Explain why this is true.

Ben quit his job as an economics professor to become a golf professional.He gave up his salary ($40,000) and invested his retirement fund of $50,000 (which was earning 10 percent interest) in this venture.After all expenses, his net winnings (profit) were $45,000.Ben's economic profits were

In arriving at the quantity of output and price of its product, a company

Figure 8-3 -Figure 8-3 shows a firm's total profit function.At an output of 40, the firm's total profit equals ____.

The average revenue curve can also be described as the demand curve.

Michael Jordan averaged 35 points per game over a 100-game season.During the playoff round of 10 games, he averaged 50 points, and in the five-game championship series, he led the Chicago Bulls to victory, averaging 40 points.For the entire season, how many points did Jordan score, what was his average, and did the championship series pull his previous average up or down?

The demand curve facing Company ABC is perfectly elastic.What is its marginal revenue?