Question 1

All business firms should consider their fixed costs in determining the prices they set.

Accepted Answer

A) True 
 B)False

Question 2

In 1984, British Prime Minister Margaret Thatcher decided to shut down so-called uneconomic coal mines owned by the government.The National Union of Mineworkers protested, asserting that there was enough coal in the mines to continue current levels of production for years.Thatcher implicitly argued that her decision was economically sound because, at any practical level of output, for each "uneconomic" mine,

Accepted Answer

A) MC > AC. 
B) for every input, MPP > APP. 
C) MC > MR. 
D) AC > MC. 
A) MC > AC. 
B) for every input, MPP > APP. 
C) MC > MR. 
D) AC > MC.

Question 3

Assume that you have taken over management of a small concession stand on a local beach for the summer.Your main product is iced water, popular on hot days.You've been selling 400 cups per day at 50 cents each.The cups cost 5 cents each.One of your customers suggests that you cut the price to 40 cents to make more money.For the customer to be correct, how much must your sales increase?

Accepted Answer

The original profit was 50Q − 5Q = 45Q.T

Question 4

If a firm's average cost is currently $100, and the marginal cost is $95, then the average cost is currently falling.

Accepted Answer

A) True 
 B)False

Question 5

The average revenue curve can also be described as the demand curve.

Accepted Answer

A) True 
 B)False

Question 6

If the price of a product is $10 per unit and the variable cost per unit is $5, the firm is making a profit.

Accepted Answer

A) True 
 B)False

Question 7

Figure 8-3  
-Figure 8-3 shows a firm's total profit function.At an output of 40, the firm's total profit equals ____.

Accepted Answer

A) 10 
B) 40 
C) 200 
D) 400 
A) 10 
B) 40 
C) 200 
D) 400

Question 8

​  
-The firm described in Table 8-1 has a fixed cost of ____ at its optimal level of output.

Accepted Answer

A) 2 
B) 6 
C) 10 
D) 26 
A) 2 
B) 6 
C) 10 
D) 26

Question 9

Most business people calculate marginal cost and marginal revenue to decide how much to produce.

Accepted Answer

A) True 
 B)False

Question 10

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 11

If a firm has determined its optimal output level, where MR = MC, then price

Accepted Answer

A) is unchanged. 
B) is set by statistical analysis of the market. 
C) is equal to MC. 
D) is determined by the market demand at that output. 
A) is unchanged. 
B) is set by statistical analysis of the market. 
C) is equal to MC. 
D) is determined by the market demand at that output.

Question 12

A profit-maximizing firm always

Accepted Answer

A) sells its output at P = MC. 
B) produces at the output at which MR is maximized. 
C) hires labor until the MRP of labor < 0. 
D) finds the output where marginal profit is zero. 
A) sells its output at P = MC. 
B) produces at the output at which MR is maximized. 
C) hires labor until the MRP of labor < 0. 
D) finds the output where marginal profit is zero.

Question 13

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 14

Net benefit is equal to total benefit minus marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

A firm is generally more interested in marginal profits than in total profits.

Accepted Answer

A) True 
 B)False

Question 16

The rule of equating marginal benefit with marginal cost is a tool that can be applied to a wide variety of decisions, not just economics.

Accepted Answer

A) True 
 B)False

Question 17

In reality, decisions made by firms may not always produce maximum total profit because some executives

Accepted Answer

A) are more motivated by altruism. 
B) are more interested in market share than profits. 
C) may push research and development to the point that profits decline. 
D) All of the responses are correct. 
A) are more motivated by altruism. 
B) are more interested in market share than profits. 
C) may push research and development to the point that profits decline. 
D) All of the responses are correct.

Question 18

Figure 8-5  
-In Figure 8-5, profits are maximized at output of

Accepted Answer

A) 10 
B) 35 
C) 50 
D) 60 
A) 10 
B) 35 
C) 50 
D) 60

Question 19

If MC > MR,

Accepted Answer

A) output should be reduced. 
B) marginal profit is positive. 
C) there are losses. 
D) output should be increased. 
A) output should be reduced. 
B) marginal profit is positive. 
C) there are losses. 
D) output should be increased.

Question 20

Explain the rules for finding maximum profit using total revenue and total cost and marginal revenue and marginal cost.

Accepted Answer

Maximum profit is where total revenue ex

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

All business firms should consider their fixed costs in determining the prices they set.

If a firm's average cost is currently $100, and the marginal cost is $95, then the average cost is currently falling.

The average revenue curve can also be described as the demand curve.

If the price of a product is $10 per unit and the variable cost per unit is $5, the firm is making a profit.

Figure 8-3 -Figure 8-3 shows a firm's total profit function.At an output of 40, the firm's total profit equals ____.

​ -The firm described in Table 8-1 has a fixed cost of ____ at its optimal level of output.

Most business people calculate marginal cost and marginal revenue to decide how much to produce.

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

If a firm has determined its optimal output level, where MR = MC, then price

A profit-maximizing firm always

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.

Net benefit is equal to total benefit minus marginal cost.

A firm is generally more interested in marginal profits than in total profits.

The rule of equating marginal benefit with marginal cost is a tool that can be applied to a wide variety of decisions, not just economics.

In reality, decisions made by firms may not always produce maximum total profit because some executives

Figure 8-5 -In Figure 8-5, profits are maximized at output of

If MC > MR,

Explain the rules for finding maximum profit using total revenue and total cost and marginal revenue and marginal cost.

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

-The firm described in Table 8-1 has a fixed cost of ____ at its optimal level of output.

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