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

Decision making that seeks only solutions that are acceptable is called

A firm's fixed cost

Average cost equals total cost multiplied by the number of units of output.

The total cost of producing one unit of output is $200; two units cost $300, three units $450, and four units $800.Fixed cost is $50.Draw the associated total cost, average cost, and marginal cost curves, placing total cost on one graph and marginal and average cost on a second graph.

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

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.

Price and output decisions are two aspects of the same choice.

Marginal revenue equals the change in total revenue that is earned by selling one more unit of output.

To find a firm's total revenue at every quantity, all you need to know is

If a profit-maximizing firm's fixed cost of producing widgets falls,

At a profit-maximizing output level,

Suppose that on a Saturday night at 10pm a large hotel has 300 vacant rooms, with little expectation of renting them at such a late hour on a weekend.A traveler comes in the door, looking a bit down on his luck, and asks how much a room will cost.Since he can't afford the normal rate of $150, the night manager decides to let him stay in the room for only $40.Is it likely that this decision reduced, or increased, the hotel's profits? Explain your answer.

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

If the marginal profit of the next unit is negative, the firm should produce more output in order to generate greater profit.

Whenever average cost exceeds marginal cost,

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

Many large universities rent out parts of their campuses to conference groups during the summer because such groups cause little damage, require little staff attention, and bring in large amounts of income.A university's decision to rent its campus to a conference group is most clearly based on

1 10 5 2 9 8 3 8 12 4 7 17 5 6 23 Explain how much the firm shown in Table 8-3 should produce, first using total profit and then using marginal analysis.Table 8-3

Define the following terms completely and concisely. a.marginal revenue b.average revenue c.optimal decision d.satisficing e.marginal profit

Economists and accountants have very different definitions of profit.