Question 1

A firm's price is

Accepted Answer

A) greater than average revenue. 
B) greater than marginal revenue. 
C) less than marginal cost. 
D) equal to average revenue. 
A) greater than average revenue. 
B) greater than marginal revenue. 
C) less than marginal cost. 
D) equal to average revenue.

Question 2

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.

Question 3

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 4

Average cost

Accepted Answer

A) is always larger than marginal cost. 
B) declines for some range of output, hits a minimum, and then increases. 
C) is always smaller than marginal cost. 
D) is total cost/price of the product. 
A) is always larger than marginal cost. 
B) declines for some range of output, hits a minimum, and then increases. 
C) is always smaller than marginal cost. 
D) is total cost/price of the product.

Question 5

In the case study in the text involving calculator production, the fact that each calculator produced added $10.30 to cost and $12 to revenue made clear the value of ____ in determining whether or not to suspend production.

Accepted Answer

A) average fixed cost 
B) cost saving 
C) marginal analysis 
D) the level of fixed cost 
A) average fixed cost 
B) cost saving 
C) marginal analysis 
D) the level of fixed cost

Question 6

Table 8-2   ​
-In Table 8-2, the profit-maximizing level of output is

Accepted Answer

A) 6 
B) 10 
C) 16 
D) 21 
A) 6 
B) 10 
C) 16 
D) 21

Question 7

Figure 8-5  
-If the marginal profit from increasing output by one unit is negative, then to attain an optimum, the firm should

Accepted Answer

A) increase output until marginal profit equals zero. 
B) reduce output until marginal profit equals zero. 
C) increase output until marginal profit is maximized. 
D) reduce output until marginal profit is maximized. 
A) increase output until marginal profit equals zero. 
B) reduce output until marginal profit equals zero. 
C) increase output until marginal profit is maximized. 
D) reduce output until marginal profit is maximized.

Question 8

Accounting profit differs from economic profit by the amount of the explicit costs faced by a firm.

Accepted Answer

A) True 
 B)False

Question 9

For a number of years, General Motors used a pricing strategy designed to maintain at least 40 percent of the American car market.Does this strategy suggest that GM was maximizing profits or pursuing an alternative strategy?

Accepted Answer

Pursuing market share is not the same th

Question 10

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 11

A graph of total profits is always likely to be positively sloped throughout its length.

Accepted Answer

A) True 
 B)False

Question 12

Figure 8-5  
-In Figure 8-5, the firm's marginal profit at the profit maximizing output level

Accepted Answer

A) is 10. 
B) is 35. 
C) is 0. 
D) cannot be determined from the diagram. 
A) is 10. 
B) is 35. 
C) is 0. 
D) cannot be determined from the diagram.

Question 13

​  
-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 14

Which of the following is true if the opportunity cost of producing a particular good is less than its accounting profit?

Accepted Answer

A) Economic profit is zero. 
B) Economic profit is negative. 
C) Economic profit is positive. 
D) Economic profit cannot be determined. 
A) Economic profit is zero. 
B) Economic profit is negative. 
C) Economic profit is positive. 
D) Economic profit cannot be determined.

Question 15

​  
-An airline is considering adding a flight from Chicago to Sioux Falls.Revenue from the flight is expected to be $3,000.The total cost of the flight is $5,500, and the variable cost is $2,000.Should the airline add this flight?

Accepted Answer

A) No, the revenue ($3,000) is below the cost ($5,500). 
B) No, the addition to profit is very small and not worth the effort. 
C) Yes, profit increases by $1,000 ($3,000 − $2,000). 
D) Yes, profit increases by $3,000. 
A) No, the revenue ($3,000) is below the cost ($5,500). 
B) No, the addition to profit is very small and not worth the effort. 
C) Yes, profit increases by $1,000 ($3,000 − $2,000). 
D) Yes, profit increases by $3,000.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Michael Jordan averaged 35 points per game over a 100-game season.During the playoff round of 10 games, he averaged 50 points, and in the five-game championship series, he led the Chicago Bulls to victory, averaging 40 points.For the entire season, how many points did Jordan score, what was his average, and did the championship series pull his previous average up or down?

Accepted Answer

Over the regular season, Jordan scored 3

Question 18

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 19

A profit-maximizing firm always

Accepted Answer

A) sells its output at P = MR. 
B) produces at the output at which MR = 0. 
C) hires labor until the MRP of labor = 0. 
D) produces every unit of output for which MR > MC. 
A) sells its output at P = MR. 
B) produces at the output at which MR = 0. 
C) hires labor until the MRP of labor = 0. 
D) produces every unit of output for which MR > MC.

Question 20

If a firm's fixed costs increase, then profits drop but its output should not change.

Accepted Answer

A) True 
 B)False

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

A firm's price is

For any firm, price always equals

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

Average cost

In the case study in the text involving calculator production, the fact that each calculator produced added $10.30 to cost and $12 to revenue made clear the value of ____ in determining whether or not to suspend production.

Table 8-2 ​ -In Table 8-2, the profit-maximizing level of output is

Figure 8-5 -If the marginal profit from increasing output by one unit is negative, then to attain an optimum, the firm should

Accounting profit differs from economic profit by the amount of the explicit costs faced by a firm.

For a number of years, General Motors used a pricing strategy designed to maintain at least 40 percent of the American car market.Does this strategy suggest that GM was maximizing profits or pursuing an alternative strategy?

Economic profit of a decision in question equals

A graph of total profits is always likely to be positively sloped throughout its length.

Figure 8-5 -In Figure 8-5, the firm's marginal profit at the profit maximizing output level

​ -To maximize its profits, the firm described in Table 8-1 should produce ____ unit(s) of output.

Which of the following is true if the opportunity cost of producing a particular good is less than its accounting profit?

​ -An airline is considering adding a flight from Chicago to Sioux Falls.Revenue from the flight is expected to be $3,000.The total cost of the flight is $5,500, and the variable cost is $2,000.Should the airline add this flight?

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

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

A profit-maximizing firm always

If a firm's fixed costs increase, then profits drop but its output should not change.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Table 8-2 -In Table 8-2, the profit-maximizing level of output is

-To maximize its profits, the firm described in Table 8-1 should produce ____ unit(s) of output.

-An airline is considering adding a flight from Chicago to Sioux Falls.Revenue from the flight is expected to be $3,000.The total cost of the flight is $5,500, and the variable cost is $2,000.Should the airline add this flight?