Question 1

For any firm, price always equals

Accepted Answer

A)  average revenue. 
B)  marginal revenue. 
C)  marginal cost. 
D)  marginal profit. 
A)  average revenue. 
B)  marginal revenue. 
C)  marginal cost. 
D)  marginal profit. A

Question 2

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

Accepted Answer

A) True 
 B)False  True

Question 3

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

Accepted Answer

A) True 
 B)False  True

Question 4

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 5

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 6

Figure 8-4
  
-In Figure 8-4 at output level 2,

Accepted Answer

A)  MR > MC. 
B)  the slope of the total profit curve is negative. 
C)  there are negative profits. 
D)  marginal revenue is rising compared to output. 
A)  MR > MC. 
B)  the slope of the total profit curve is negative. 
C)  there are negative profits. 
D)  marginal revenue is rising compared to output.

Question 7

If marginal cost is less than average cost, average cost must fall when more units are produced.

Accepted Answer

A) True 
 B)False

Question 8

Total profit is represented by the vertical distance between a total revenue curve and a total cost curve.

Accepted Answer

A) True 
 B)False

Question 9

If output is increased beyond the point where total profit is maximized,

Accepted Answer

A)  marginal profit will be zero. 
B)  marginal profit will be negative. 
C)  marginal profit will be positive. 
D)  MR > MC. 
A)  marginal profit will be zero. 
B)  marginal profit will be negative. 
C)  marginal profit will be positive. 
D)  MR > MC.

Question 10

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

Accepted Answer

A) True 
 B)False

Question 11

If MC > MR,

Accepted Answer

A)  output should be reduced. 
B)  marginal profit is positive. 
C)  there are losses. 
D)  output should be increased. 
A)  output should be reduced. 
B)  marginal profit is positive. 
C)  there are losses. 
D)  output should be increased.

Question 12

The demand curve facing a firm is also the firm's

Accepted Answer

A)  total utility curve. 
B)  average revenue curve. 
C)  average utility curve. 
D)  total revenue curve. 
A)  total utility curve. 
B)  average revenue curve. 
C)  average utility curve. 
D)  total revenue curve.

Question 13

Economists use a model that is a literal description of business' behavior.

Accepted Answer

A) True 
 B)False

Question 14

"As long as total revenue slopes up, marginal revenue must slope up also." Explain whether this statement is true or false.

Accepted Answer

Marginal revenue is the slope

Question 15

Average cost is the cost of producing the next unit.

Accepted Answer

A) True 
 B)False

Question 16

Marginal cost is defined by the slope of the total revenue curve.

Accepted Answer

A) True 
 B)False

Question 17

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 18

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

Accepted Answer

A) True 
 B)False

Question 19

The state is considering adding a satellite campus to its major university.How can marginal analysis assist, even though the university does not attempt to maximize profits?

Accepted Answer

Marginal analysis provides the general r

Question 20

Accounting profit is usually smaller than economic profit.

Accepted Answer

A) True 
 B)False

Exam 8: Output, Price, and Profit: The Importance of Marginal Analysis

For any firm, price always equals

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

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

Economic profit of a decision in question equals

The typical total profit graphical presentation is shown as

Figure 8-4 -In Figure 8-4 at output level 2,

If marginal cost is less than average cost, average cost must fall when more units are produced.

Total profit is represented by the vertical distance between a total revenue curve and a total cost curve.

If output is increased beyond the point where total profit is maximized,

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

If MC > MR,

The demand curve facing a firm is also the firm's

Economists use a model that is a literal description of business' behavior.

"As long as total revenue slopes up, marginal revenue must slope up also." Explain whether this statement is true or false.

Average cost is the cost of producing the next unit.

Marginal cost is defined by the slope of the total revenue curve.

Profit can be maximized only where marginal revenue equals

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

The state is considering adding a satellite campus to its major university.How can marginal analysis assist, even though the university does not attempt to maximize profits?

Accounting profit is usually smaller than economic profit.

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 I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

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

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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