Question 1

In the short run, which are most important in determining changes in output?

Accepted Answer

A)  marginal costs and revenue 
B)  total costs and revenue 
C)  average costs and revenue 
D)  fixed costs 
A)  marginal costs and revenue 
B)  total costs and revenue 
C)  average costs and revenue 
D)  fixed costs

Question 2

Average cost can be thought of as the cost per unit.

Accepted Answer

A) True 
 B)False

Question 3

A company draws its total cost curve and total revenue curve on the same graph.If the firm wishes to maximize profits, it will select the output at which the

Accepted Answer

A)  vertical distance between the two curves is greatest. 
B)  total cost curve cuts the total revenue curve. 
C)  horizontal distance between the two curves is greatest. 
D)  slope of the total revenue curve is greatest. 
A)  vertical distance between the two curves is greatest. 
B)  total cost curve cuts the total revenue curve. 
C)  horizontal distance between the two curves is greatest. 
D)  slope of the total revenue curve is greatest.

Question 4

Marginal cost

Accepted Answer

A)  equals the slope of the total cost curve. 
B)  is calculated as DTC/DQ. 
C)  is the increase in total cost resulting from a one-unit increase in output. 
D)  All of the above are correct. 
A)  equals the slope of the total cost curve. 
B)  is calculated as DTC/DQ. 
C)  is the increase in total cost resulting from a one-unit increase in output. 
D)  All of the above are correct.

Question 5

The demand curve for a firm's product is also the curve showing

Accepted Answer

A)  total revenue. 
B)  marginal revenue. 
C)  average revenue. 
D)  average profits. 
A)  total revenue. 
B)  marginal revenue. 
C)  average revenue. 
D)  average profits.

Question 6

Complete the following table and determine the point of profit maximization.
 \(\begin{array}{llll}
&\underline {\text { Total }} & \underline {\text { Marginal} } & \underline {\text { Total }} & \underline {\text { Marginal} } \
\underline {\text { Quantity }}&\underline {\text { Revenue} } & \underline {\text { Revenue }} &\underline {\text { Cost }} &\underline { \text { Cost }}& \underline { \text { Profit } } \
100 & 500 &\underline { \quad\quad\quad\quad} & {200}&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
101 & 504.95 &\underline { \quad\quad\quad\quad} & 204.50&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
102 & 509.85 & \underline { \quad\quad\quad\quad} & 209.10&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
103 & 514.70 &\underline { \quad\quad\quad\quad}  & 213.80&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
104 & 519.50 &\underline { \quad\quad\quad\quad}  & 218.60&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
105 & 524.25 & \underline { \quad\quad\quad\quad}  & 223.50&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
106 & 528.95 & \underline { \quad\quad\quad\quad}  & 228.50&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
107 & 533.60 & \underline { \quad\quad\quad\quad}  & 233.60 &\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad} \
108 & 538.20 & \underline { \quad\quad\quad\quad}  & 238.80&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
109 & 542.75 & \underline { \quad\quad\quad\quad}  & 244.10&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad}  \
110 & 547.25 & \underline { \quad\quad\quad\quad} & 249.50&\underline { \quad\quad\quad\quad}& \underline { \quad\quad\quad\quad} 
\end{array}\)

Accepted Answer

The profit-maximizing output is Q = 104.

Question 7

Table 8-1
 $ \begin{array}{lcccccr}\text { Output (units) } & 0 & 1 & 2 & 3 & 4 & 5 \ \text { Total Revenue (\$) } & 0 & 9 & 16 & 21 & 27 & 31 \ \text { Total Cost }(\$) & 10 & 12 & 15 & 19 & 26 & 35\end{array} $
-To maximize its profits, the firm described in Table 8-1 should produce ____ unit(s) of output.

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 8

Average revenue is slightly higher than price.

Accepted Answer

A) True 
 B)False

Question 9

A firm can always increase its output by one unit at a marginal cost of $10.Its marginal cost curve is

Accepted Answer

A)  a horizontal line. 
B)  a vertical line. 
C)  a ray with slope equal to 10. 
D)  exactly one-tenth as steep as its total cost curve. 
A)  a horizontal line. 
B)  a vertical line. 
C)  a ray with slope equal to 10. 
D)  exactly one-tenth as steep as its total cost curve.

Question 10

Total revenue is equal to quantity multiplied by average revenue.

Accepted Answer

A) True 
 B)False

Question 11

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 12

Marginal cost curves and average cost curves are both purely upward sloping.

Accepted Answer

A) True 
 B)False

Question 13

Marginal profit is the profit

Accepted Answer

A)  earned by a firm that is about to go out of business. 
B)  calculated directly from the total cost curve. 
C)  that is added by a one-unit increase in total output. 
D)  earned for each dollar of cost increase. 
A)  earned by a firm that is about to go out of business. 
B)  calculated directly from the total cost curve. 
C)  that is added by a one-unit increase in total output. 
D)  earned for each dollar of cost increase.

Question 14

Net benefit is equal to total benefit minus marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

Marginal profit is the addition to a firm's total profit from a

Accepted Answer

A)  $1 change in its price. 
B)  one-unit change in its output. 
C)  reduction in total cost. 
D)  reduction in marginal cost. 
A)  $1 change in its price. 
B)  one-unit change in its output. 
C)  reduction in total cost. 
D)  reduction in marginal cost.

Question 16

If at optimum output of 1,000 units, the firm is incurring average variable cost per unit of $3, average fixed cost per unit of $1.50, and selling its output at $7 per unit, total profit is

Accepted Answer

A)  $7,000. 
B)  $2,500. 
C)  $1,500. 
D)  $250. 
A)  $7,000. 
B)  $2,500. 
C)  $1,500. 
D)  $250.

Question 17

Accounting profit is usually larger than economic profit.

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

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 20

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

Accepted Answer

A) True 
 B)False

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

In the short run, which are most important in determining changes in output?

Average cost can be thought of as the cost per unit.

A company draws its total cost curve and total revenue curve on the same graph.If the firm wishes to maximize profits, it will select the output at which the

Marginal cost

The demand curve for a firm's product is also the curve showing

Complete the following table and determine the point of profit maximization. 100 500 200 101 504.95 204.50 102 509.85 209.10 103 514.70 213.80 104 519.50 218.60 105 524.25 223.50 106 528.95 228.50 107 533.60 233.60 108 538.20 238.80 109 542.75 244.10 110 547.25 249.50

Average revenue is slightly higher than price.

A firm can always increase its output by one unit at a marginal cost of $10.Its marginal cost curve is

Total revenue is equal to quantity multiplied by average revenue.

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

Marginal cost curves and average cost curves are both purely upward sloping.

Marginal profit is the profit

Net benefit is equal to total benefit minus marginal cost.

Marginal profit is the addition to a firm's total profit from a

If at optimum output of 1,000 units, the firm is incurring average variable cost per unit of $3, average fixed cost per unit of $1.50, and selling its output at $7 per unit, total profit is

Accounting profit is usually larger than economic profit.

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

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.

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

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

Filters

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