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

Bob goes to his favorite hot dog stand, which is offering one hot dog for $2.50 or two for $4.00.Bob's marginal cost of a second hot dog is

Marginal, average, and total figures are unrelated.

Average cost

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

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

The difference between economic profit and accountant's definition of profit is that an economist's total cost counts the ____ of inputs.

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

Why assume that firms maximize profit, when it is easy to find companies that pursue other goals such as saving rain forests (Ben and Jerry's) and sponsoring Mister Rogers (Sears)?

Robert left a law firm to begin his own catering business.Robert's salary at the law firm was $100,000.He put $40,000 of his own funds into the business to purchase cooking equipment.His funds were previously earning 10 percent per year.The cost of operating the business including food and supplies was $60,000.Robert's catering firm earned $170,000 in revenues for the first year.Robert's brother insists that he should go back to the law firm, since he was making $100,000 there.Robert says his brother is wrong.Robert is right because

Marginal profit is the slope of the total profit curve.

A firm that decides to make a price cut assumes that marginal profit is negative.

Whenever average cost exceeds marginal cost,

A firm's total profit is the difference between its sales and what it pays out in costs.

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

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

Economists assume that business firms attempt to maximize their profits.

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

Total revenue cannot be derived from the demand curve or a demand schedule.

At its current level of output, a firm's average cost is $25 and its marginal cost is $20.If the firm increases output by one unit and marginal cost is $22, average cost will be

The assumption that firms attempt to maximize profits will yield good predictions even if firms sometimes pursue other goals.