Question 1

If fixed cost rises,

Accepted Answer

A) the profit-maximizing level of output would decrease. 
B) the profit-maximizing level of output would not change. 
C) marginal cost rises. 
D) variable cost falls. 
A) the profit-maximizing level of output would decrease. 
B) the profit-maximizing level of output would not change. 
C) marginal cost rises. 
D) variable cost falls.

Question 2

In the case study discussed in the chapter, the electronics firm was losing money by selling its calculators at a price that was below average cost.

Accepted Answer

A) True 
 B)False

Question 3

If average cost is falling, then marginal cost must be falling.

Accepted Answer

A) True 
 B)False

Question 4

Why is the total profit curve shaped like a hill?

Accepted Answer

If a firm produces nothing, it certainly

Question 5

If total profit is maximized, then marginal cost must equal marginal revenue.

Accepted Answer

A) True 
 B)False

Question 6

Economists and accountants use the same definition of profit.

Accepted Answer

A) True 
 B)False

Question 7

Figure 8-4  
-In Figure 8-4 at output level 2,

Accepted Answer

A) MR > MC. 
B) the slope of the total profit curve is negative. 
C) there are negative profits. 
D) marginal revenue is rising compared to output. 
A) MR > MC. 
B) the slope of the total profit curve is negative. 
C) there are negative profits. 
D) marginal revenue is rising compared to output.

Question 8

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 9

Total cost equals average cost multiplied by the quantity of output.

Accepted Answer

A) True 
 B)False

Question 10

Do firms really seek to maximize profits?

Accepted Answer

Profit maximization is difficult because

Question 11

A small business owner who is earning a positive economic profit, no matter how small, is doing better than if he or she sold his or her business and went to work for another firm.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) a $1 change in price. 
B) a one-unit change in output. 
C) the sale of inferior output. 
D) a $1 reduction in marginal cost. 
A) a $1 change in price. 
B) a one-unit change in output. 
C) the sale of inferior output. 
D) a $1 reduction in marginal cost.

Question 13

If marginal cost is less than average cost, average cost must fall when more units are produced.

Accepted Answer

A) True 
 B)False

Question 14

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 15

A firm that is earning zero economic profit should go out of business.

Accepted Answer

A) True 
 B)False

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

The optimal number of units to produce is best expressed when

Accepted Answer

A) marginal benefit exceeds marginal cost. 
B) marginal cost exceeds marginal benefit. 
C) marginal benefit and marginal cost are close to equal. 
D) marginal benefit and marginal cost are equal to zero. 
A) marginal benefit exceeds marginal cost. 
B) marginal cost exceeds marginal benefit. 
C) marginal benefit and marginal cost are close to equal. 
D) marginal benefit and marginal cost are equal to zero.

Question 18

An optimal level of output is one at which marginal profit > 0.

Accepted Answer

A) True 
 B)False

Question 19

If output is increased beyond the point where total profit is maximized,

Accepted Answer

A) marginal profit will be zero. 
B) marginal profit will be negative. 
C) marginal profit will be positive. 
D) MR > MC. 
A) marginal profit will be zero. 
B) marginal profit will be negative. 
C) marginal profit will be positive. 
D) MR > MC.

Question 20

Figure 8-3  
-If a company plots its total profit curve, it would show

Accepted Answer

A) that the curve has a negative slope over the entire range of output. 
B) that the slope of the curve is negative, then zero and then becomes positive as output increases. 
C) that the slope of the curve is positive, then zero and then becomes negative as output increases. 
D) that slope is a constant at a value of one. 
A) that the curve has a negative slope over the entire range of output. 
B) that the slope of the curve is negative, then zero and then becomes positive as output increases. 
C) that the slope of the curve is positive, then zero and then becomes negative as output increases. 
D) that slope is a constant at a value of one.

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

If fixed cost rises,

In the case study discussed in the chapter, the electronics firm was losing money by selling its calculators at a price that was below average cost.

If average cost is falling, then marginal cost must be falling.

Why is the total profit curve shaped like a hill?

If total profit is maximized, then marginal cost must equal marginal revenue.

Economists and accountants use the same definition of profit.

Figure 8-4 -In Figure 8-4 at output level 2,

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

Total cost equals average cost multiplied by the quantity of output.

Do firms really seek to maximize profits?

A small business owner who is earning a positive economic profit, no matter how small, is doing better than if he or she sold his or her business and went to work for another firm.

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

If marginal cost is less than average cost, average cost must fall when more units are produced.

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?

A firm that is earning zero economic profit should go out of business.

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

The optimal number of units to produce is best expressed when

An optimal level of output is one at which marginal profit > 0.

If output is increased beyond the point where total profit is maximized,

Figure 8-3 -If a company plots its total profit curve, it would show

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

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