Exam 9: Maximizing Profit

Suppose you were working for Richstone's bakery and calculating whether the bakery was making a profit, considering the recent increase in rent. You have data for price (P),MR, ATC, MC, AVC, at the quantity of 1,000 breads a day. Among the other relationships you consider is (P - ATC) which measures the firm's

Todd owns a painting company. He needs brushes, ladders, paint, painters, and a truck in order to produce even one painted house. If it takes one hour to set up and take down the equipment each day, would Todd care if his employees worked an 8-hour day or a 10- hour day, assuming that each hour they painted just as quickly as the previous hour?

When the price curve is a horizontal line, it always coincides with all of the following except

Wild Woman's Wild Wilderness Adventures sells 1,000 vacation packages each year.The average total cost of the packages is $450 and each package sells for $770. Annual profit is

-In Exhibit I-1, the marginal revenue of the twelfth unit equals

Technically speaking, average revenue is

Once profit is maximized at the output level where MR = MC, profit can be calculated by subtracting the ATC from price and multiplying the result by the quantity produced.

-In Exhibit I-7, the price is fixed at $14. This firm is currently operating where MR = MC. What do you advise this firm to do?

If the price of parsley is $1, and the price remains unchanged no matter how much parsley is produced, then the AR curve

Which of the following is not possible when a firm is maximizing its profits?

There may be a different criterion used for the long run, but for the short run, a firm should shut down production if price is less than

Consider a firm with one fixed cost, rent, and one variable cost, wages. Describe the effects of an increase of this firm's rent.

The author of the New Industrial State, who believes that managerial bureaucracy controls corporate goals and behavior, is

-In Exhibit I-3, the firm is producing 50 units. What would you advise this firm to do?

A firm would be maximizing profit if MR > MC and TR > TC.

Suppose you are viewing a graph of the total revenue generated from the sale of bananas.On the horizontal axis the numbers indicate the quantity of bananas. On the vertical axis the numbers indicate total revenue. Suppose there are two lines on the graph, A and B,and they only meet when quantity is zero. If, at an output of 10,000 bananas, A lies aboveB, we can say that

Suppose an entrepreneur commits to a production schedule but overestimates the market price for her products. Which situation is not possible?

Entrepreneurs operate in which spheres of economic life?

Peter Schran plays no favorites. It's one price for all customers. Under this circumstance, we know that

Suppose you are producing where MC = AVC = $3 and this is loss minimizing. If market reports predict that the price of your product will reach a long-run equilibrium level that is $4 higher than it is today, you should