Question 1

Marginal revenue is the addition to a firm's revenue from

Accepted Answer

A) a $1 change in price. 
B) a one-unit change in output. 
C) the sale of inferior output. 
D) a $1 reduction in marginal cost. 
A) a $1 change in price. 
B) a one-unit change in output. 
C) the sale of inferior output. 
D) a $1 reduction in marginal cost.

Question 2

Tour companies and cruise lines often offer last minute fares that are far below the prices paid by customers who have booked their trips far in advance.Use marginal analysis to explain this pricing tactic.

Accepted Answer

The answer rests on the marginal cost an

Question 3

Once a firm has selected a price for its product, quantity is decided by consumers and their demand curves.

Accepted Answer

A) True 
 B)False

Question 4

In 1984, British Prime Minister Margaret Thatcher decided to shut down so-called "uneconomic" coal mines owned by the government.The National Union of Mineworkers protested, asserting that there was enough coal in the mines to continue current levels of production for years.Thatcher implicitly argued that her decision was economically sound because, at any practical level of output, for each "uneconomic" mine,

Accepted Answer

A) MC > AC. 
B) for every input, MPP > APP. 
C) MC > MR. 
D) AC > MC. 
A) MC > AC. 
B) for every input, MPP > APP. 
C) MC > MR. 
D) AC > MC.

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Profit maximization is

Accepted Answer

A) the only motive of any firm's management. 
B) a behavioral assumption to simplify analysis. 
C) the same as satisficing. 
D) a literal description of a firm's behavior. 
A) the only motive of any firm's management. 
B) a behavioral assumption to simplify analysis. 
C) the same as satisficing. 
D) a literal description of a firm's behavior.

Question 7

Profit is maximized at the output at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 8

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

Accepted Answer

A) True 
 B)False

Question 9

When a firm's fixed cost rises, its total profit curve shifts

Accepted Answer

A) up at every output level. 
B) down at every output level. 
C) left at every profit level. 
D) right at every profit level. 
A) up at every output level. 
B) down at every output level. 
C) left at every profit level. 
D) right at every profit level.

Question 10

Dunston Military Academy has an annual deficit of $250,000.Its 1,000 students pay tuition of $10,000 each per year.The economics faculty has recommended solving the problem by recruiting additional athletes with $5,000 scholarships.Each additional athlete will cost the school $2,500 (equipment, etc.).Assuming the academy agrees, how many athletes are needed to eliminate the deficit?

Accepted Answer

A) Zero, the deficit cannot be eliminated by giving more scholarships. 
B) 25 
C) 50 
D) 100 
A) Zero, the deficit cannot be eliminated by giving more scholarships. 
B) 25 
C) 50 
D) 100

Question 11

Total profit is maximized

Accepted Answer

A) where the difference between total revenue and total cost is greatest. 
B) at that output level where marginal revenue equals average cost. 
C) where total revenue is at a maximum. 
D) at the point where all variable costs are covered. 
A) where the difference between total revenue and total cost is greatest. 
B) at that output level where marginal revenue equals average cost. 
C) where total revenue is at a maximum. 
D) at the point where all variable costs are covered.

Question 12

An optimal level of output is one at which marginal profit > 0.

Accepted Answer

A) True 
 B)False

Question 13

Total profit is maximized if the slope of the total profit curve is

Accepted Answer

A) positive. 
B) negative. 
C) increasing. 
D) zero. 
A) positive. 
B) negative. 
C) increasing. 
D) zero.

Question 14

Business people often use "hunches" and intuition to make decisions regarding what to produce.

Accepted Answer

A) True 
 B)False

Question 15

Table 8-1
  
-At optimal output, the firm described in Table 8-1 earns a profit of

Accepted Answer

A) $1 per unit of output. 
B) $2 per unit of output. 
C) $1 total. 
D) $2 total. 
A) $1 per unit of output. 
B) $2 per unit of output. 
C) $1 total. 
D) $2 total.

Question 16

Distinguish between the economist's definition of profit and the accountant's definition.Which is superior for decision making?

Accepted Answer

Accounting profit is revenue minus actua

Question 17

A firm can choose a quantity of output, and the price is then determined by

Accepted Answer

A) the government. 
B) the supply schedule. 
C) consumers' demand. 
D) the average cost. 
A) the government. 
B) the supply schedule. 
C) consumers' demand. 
D) the average cost.

Question 18

Regarding the relationship between marginal profit and average profit, which of the following statements is NOT true?

Accepted Answer

A) ​If the average profit is rising, the marginal profit figure must be rising. 
B) ​If marginal profit is lower than average profit, then average profit must decrease when profit increases. 
C) ​If marginal profit is below average profit, the average profit decreases. 
D) ​All of these statements are true. 
A) ​If the average profit is rising, the marginal profit figure must be rising. 
B) ​If marginal profit is lower than average profit, then average profit must decrease when profit increases. 
C) ​If marginal profit is below average profit, the average profit decreases. 
D) ​All of these statements are true.

Question 19

The addition to total revenue resulting from one more unit of output is called marginal revenue.

Accepted Answer

A) True 
 B)False

Question 20

Given a demand curve, explain how total revenue may be calculated.

Accepted Answer

A demand curve consists of the prices an

Marginal revenue is the addition to a firm's revenue from

Tour companies and cruise lines often offer last minute fares that are far below the prices paid by customers who have booked their trips far in advance.Use marginal analysis to explain this pricing tactic.

Once a firm has selected a price for its product, quantity is decided by consumers and their demand curves.

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

Profit maximization is

Profit is maximized at the output at which marginal revenue equals marginal cost.

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

When a firm's fixed cost rises, its total profit curve shifts

Total profit is maximized

An optimal level of output is one at which marginal profit > 0.

Total profit is maximized if the slope of the total profit curve is

Business people often use "hunches" and intuition to make decisions regarding what to produce.

Table 8-1 -At optimal output, the firm described in Table 8-1 earns a profit of

Distinguish between the economist's definition of profit and the accountant's definition.Which is superior for decision making?

A firm can choose a quantity of output, and the price is then determined by

Regarding the relationship between marginal profit and average profit, which of the following statements is NOT true?

The addition to total revenue resulting from one more unit of output is called marginal revenue.

Given a demand curve, explain how total revenue may be calculated.

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

Marginal revenue is the addition to a firm's revenue from

Tour companies and cruise lines often offer last minute fares that are far below the prices paid by customers who have booked their trips far in advance.Use marginal analysis to explain this pricing tactic.

Once a firm has selected a price for its product, quantity is decided by consumers and their demand curves.

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

Profit maximization is

Profit is maximized at the output at which marginal revenue equals marginal cost.

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

When a firm's fixed cost rises, its total profit curve shifts

Total profit is maximized

An optimal level of output is one at which marginal profit > 0.

Total profit is maximized if the slope of the total profit curve is

Business people often use "hunches" and intuition to make decisions regarding what to produce.

Table 8-1 -At optimal output, the firm described in Table 8-1 earns a profit of

Distinguish between the economist's definition of profit and the accountant's definition.Which is superior for decision making?

A firm can choose a quantity of output, and the price is then determined by

Regarding the relationship between marginal profit and average profit, which of the following statements is NOT true?

The addition to total revenue resulting from one more unit of output is called marginal revenue.

Given a demand curve, explain how total revenue may be calculated.

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