Question 1

Do firms really seek to maximize profits?

Accepted Answer

Profit maximization is difficult because

Question 2

Profit is maximized at the output at which marginal revenue exceeds marginal cost by the greatest margin.

Accepted Answer

A) True 
 B)False

Question 3

Figure 8-5
  
-From Figure 8-5 one can deduce

Accepted Answer

A)  TR = TC at outputs 10 and 60. 
B)  MR = MC at output 35. 
C)  TFC = 100. 
D)  All of the above are correct. 
A)  TR = TC at outputs 10 and 60. 
B)  MR = MC at output 35. 
C)  TFC = 100. 
D)  All of the above are correct.

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 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 6

A separate average revenue curve is not required when you have the demand curve for a firm.Explain.

Accepted Answer

Demand curve itself is the average reven

Question 7

A firm's total revenue is simply the price of its product multiplied by the quantity sold.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A) True 
 B)False

Question 9

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.

Accepted Answer

If X = 50,000, then economic profit of d

Question 10

If a firm's average cost is currently $100, and the marginal cost is $95, then the average cost is currently falling.

Accepted Answer

A) True 
 B)False

Question 11

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 12

A firm has positive fixed cost and positive variable cost.At its current level of output, marginal cost equals average cost.The firm must

Accepted Answer

A)  not be producing at its profit-maximizing level of output. 
B)  be producing the quantity that minimizes average cost. 
C)  be operating at a point at which total variable cost equals total fixed cost. 
D)  be earning negative profit. 
A)  not be producing at its profit-maximizing level of output. 
B)  be producing the quantity that minimizes average cost. 
C)  be operating at a point at which total variable cost equals total fixed cost. 
D)  be earning negative profit.

Question 13

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 14

Economists assume that business firms attempt to maximize their profits.

Accepted Answer

A) True 
 B)False

Question 15

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.

Question 16

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

Accepted Answer

A)  $45,000. 
B)  $5,000. 
C)  $2,000. 
D)  zero. 
A)  $45,000. 
B)  $5,000. 
C)  $2,000. 
D)  zero.

Question 17

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 18

If a person who weighs 100 lbs.is riding in an elevator and is joined by a person weighing 120 lbs., what happens to the average weight of persons on the elevator?

Accepted Answer

A)  It falls. 
B)  It rises. 
C)  It stays the same. 
A)  It falls. 
B)  It rises. 
C)  It stays the same.

Question 19

Total revenue

Accepted Answer

A)  can be calculated directly from the demand curve. 
B)  can be calculated directly from the average revenue curve. 
C)  is found by multiplying price times quantity. 
D)  All of the above are correct. 
A)  can be calculated directly from the demand curve. 
B)  can be calculated directly from the average revenue curve. 
C)  is found by multiplying price times quantity. 
D)  All of the above are correct.

Question 20

When marginal cost exceeds marginal revenue,

Accepted Answer

A)  marginal profit  marginal revenue. 
D)  marginal cost < marginal revenue - marginal profit. 
A)  marginal profit  marginal revenue. 
D)  marginal cost < marginal revenue - marginal profit.

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

Do firms really seek to maximize profits?

Profit is maximized at the output at which marginal revenue exceeds marginal cost by the greatest margin.

Figure 8-5 -From Figure 8-5 one can deduce

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

A separate average revenue curve is not required when you have the demand curve for a firm.Explain.

A firm's total revenue is simply the price of its product multiplied by the quantity sold.

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

If a firm's average cost is currently $100, and the marginal cost is $95, then the average cost is currently falling.

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 has positive fixed cost and positive variable cost.At its current level of output, marginal cost equals average cost.The firm must

Profit maximization is

Economists assume that business firms attempt to maximize their profits.

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

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

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

If a person who weighs 100 lbs.is riding in an elevator and is joined by a person weighing 120 lbs., what happens to the average weight of persons on the elevator?

Total revenue

When marginal cost exceeds marginal revenue,

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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