Question 1

If price equals average total cost, then total revenue

Accepted Answer

A)  equals total cost 
B)  equals total fixed cost 
C)  equals total variable cost 
D)  is greater than total cost 
E)  equals marginal revenue 
A)  equals total cost 
B)  equals total fixed cost 
C)  equals total variable cost 
D)  is greater than total cost 
E)  equals marginal revenue

Question 2

The Lester-Machlup controversy applies to whether or not firms

Accepted Answer

A)  choose the correct plant size 
B)  use marginal analysis to choose output levels 
C)  correctly calculate their economic profits and losses 
D)  engage in wasteful advertising campaigns 
E)  pollute the environment 
A)  choose the correct plant size 
B)  use marginal analysis to choose output levels 
C)  correctly calculate their economic profits and losses 
D)  engage in wasteful advertising campaigns 
E)  pollute the environment

Question 3

-In Exhibit I-2, this firm is currently producing 16 units. What would you advise this firm to do?

Accepted Answer

A)  decrease quantity to 13 
B)  increase quantity to 15 
C)  remain at 16 units 
D)  decrease quantity to 14 
E)  increase quantity to 17 
A)  decrease quantity to 13 
B)  increase quantity to 15 
C)  remain at 16 units 
D)  decrease quantity to 14 
E)  increase quantity to 17

Question 4

It's logical, it's a rule of thumb, it's an economic guideline: As long as MR > MC, and the firm responds by increasing the quantity it produces,

Accepted Answer

A)  profit will eventually fall to zero 
B)  profit will increase 
C)  profit will decrease 
D)  profit will remain unchanged 
E)  the firm will minimize loss 
A)  profit will eventually fall to zero 
B)  profit will increase 
C)  profit will decrease 
D)  profit will remain unchanged 
E)  the firm will minimize loss

Question 5

Setting P = ATC allows us to calculate total profit or loss.

Accepted Answer

A) True 
 B)False

Question 6

Verbally explain why a firm would maximize profits by producing output up to the point where MR = MC.

Accepted Answer

At levels of output below the equilibriu

Question 7

Who conducted the study in the 1940s that surveyed entrepreneurs to determine whether they used marginal analysis in choosing their production levels?

Accepted Answer

A)  Milton Friedman 
B)  Fritz Machlup 
C)  Michael Kalecki 
D)  Richard Lester 
E)  R. L. Hall 
A)  Milton Friedman 
B)  Fritz Machlup 
C)  Michael Kalecki 
D)  Richard Lester 
E)  R. L. Hall

Question 8

If ABC Printing produces 100 calendars, and the MR of the 100th is $5 and the MC is $3, then the firm is

Accepted Answer

A)  maximizing profit 
B)  producing too many calendars 
C)  making a $200 profit 
D)  making a $200 loss 
E)  producing too few calendars 
A)  maximizing profit 
B)  producing too many calendars 
C)  making a $200 profit 
D)  making a $200 loss 
E)  producing too few calendars

Question 9

If at 4,000 units, the price the firm can charge is higher than its AVC and lower than its ATC, then the firm will earn a profit.

Accepted Answer

A) True 
 B)False

Question 10

Who believes that marginal analysis provides the best model of a firm's behavior?

Accepted Answer

A)  William Baumol 
B)  John K. Galbraith 
C)  Milton Friedman 
D)  Richard Lester 
E)  Lester Thurow 
A)  William Baumol 
B)  John K. Galbraith 
C)  Milton Friedman 
D)  Richard Lester 
E)  Lester Thurow

Question 11

Technically speaking, when the firm's output level is zero, its total revenue equals

Accepted Answer

A)  zero 
B)  its fixed cost 
C)  its variable cost 
D)  its marginal revenue 
E)  its average revenue 
A)  zero 
B)  its fixed cost 
C)  its variable cost 
D)  its marginal revenue 
E)  its average revenue

Question 12

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 the following data:P = $20, AVC = $10, AFC = $8 and quantity of birthday cakes produced a day is 20.

Accepted Answer

A)  loss of $10 
B)  profit of $10 
C)  profit of $20 
D)  profit of $40 
E)  loss of $40 
A)  loss of $10 
B)  profit of $10 
C)  profit of $20 
D)  profit of $40 
E)  loss of $40

Question 13

The marginal cost of producing fish increases by $.01 with each additional fish. The marginal cost of the first fish is $.01, for the second it is $.02, etc. If the market price for fish is $7 per fish and your total fixed cost is $7,000, you should

Accepted Answer

A)  stop fishing after the 7,000th fish 
B)  stop fishing after the 700th fish 
C)  stop fishing after the 1,000th fish 
D)  shut down 
E)  there is not enough information to answer this question 
A)  stop fishing after the 7,000th fish 
B)  stop fishing after the 700th fish 
C)  stop fishing after the 1,000th fish 
D)  shut down 
E)  there is not enough information to answer this question

Question 14

A fishing boat owner sells her entire catch of 8,000 fish and maximizes profit that is equal to $4,000. Suppose fish prices increase and she now sells 10,000 fish. If fish prices increased by $1 per fish, what do you need to know to calculate her new average totalcost?

Accepted Answer

A)  average fixed cost 
B)  change in average variable cost 
C)  change in total variable cost 
D)  how many fish she catches 
E)  how much profit is made 
A)  average fixed cost 
B)  change in average variable cost 
C)  change in total variable cost 
D)  how many fish she catches 
E)  how much profit is made

Question 15

-In Exhibit I-3, a firm is currently producing 45 units. What would you advise this firm to do?

Accepted Answer

A)  shut down 
B)  increase quantity 
C)  stay at 45 units 
D)  decrease quantity 
E)  decrease price 
A)  shut down 
B)  increase quantity 
C)  stay at 45 units 
D)  decrease quantity 
E)  decrease price

Question 16

If price is greater than average variable cost, then the firm

Accepted Answer

A)  should cease production 
B)  earns economic profits 
C)  just breaks even 
D)  makes an economic loss 
E)  may make either an economic profit or loss 
A)  should cease production 
B)  earns economic profits 
C)  just breaks even 
D)  makes an economic loss 
E)  may make either an economic profit or loss

Question 17

For the level of output, Q, firm profit is the same whether measured by TR - TC or (AR - AVC) * Q.

Accepted Answer

A) True 
 B)False

Question 18

When price is constant, the average revenue curve is a(n)

Accepted Answer

A)  upward-sloping straight line 
B)  downward-sloping straight line 
C)  horizontal line 
D)  vertical line 
E)  point on the total revenue curve 
A)  upward-sloping straight line 
B)  downward-sloping straight line 
C)  horizontal line 
D)  vertical line 
E)  point on the total revenue curve

Question 19

If price is unchanging across the firm's entire production range, then for the firm selling bagels at $0.40 each,

Accepted Answer

A)  P = MR = AR 
B)  MR = MC = AC 
C)  TR = TC = 0 
D)  TR - TC = 0 
E)  AC = MC = TC 
A)  P = MR = AR 
B)  MR = MC = AC 
C)  TR = TC = 0 
D)  TR - TC = 0 
E)  AC = MC = TC

Question 20

The Skandusky Downtown Development Corporation (SDDC), a nonprofit entity, was accused by local taxpayers of being overstaffed and too lavishly accommodated for its purpose of achieving its community development goals. This accusation is an argument that the SDDC

Accepted Answer

A)  is managed by stakeholders 
B)  staff is following the MC = MR rule 
C)  is an example of the Lester-Machlup controversy 
D)  is engaged in empire building 
E)  is minimizing community losses 
A)  is managed by stakeholders 
B)  staff is following the MC = MR rule 
C)  is an example of the Lester-Machlup controversy 
D)  is engaged in empire building 
E)  is minimizing community losses

Exam 9: Maximizing Profit

If price equals average total cost, then total revenue

The Lester-Machlup controversy applies to whether or not firms

-In Exhibit I-2, this firm is currently producing 16 units. What would you advise this firm to do?

It's logical, it's a rule of thumb, it's an economic guideline: As long as MR > MC, and the firm responds by increasing the quantity it produces,

Setting P = ATC allows us to calculate total profit or loss.

Verbally explain why a firm would maximize profits by producing output up to the point where MR = MC.

Who conducted the study in the 1940s that surveyed entrepreneurs to determine whether they used marginal analysis in choosing their production levels?

If ABC Printing produces 100 calendars, and the MR of the 100th is $5 and the MC is $3, then the firm is

If at 4,000 units, the price the firm can charge is higher than its AVC and lower than its ATC, then the firm will earn a profit.

Who believes that marginal analysis provides the best model of a firm's behavior?

Technically speaking, when the firm's output level is zero, its total revenue equals

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 the following data:P = $20, AVC = $10, AFC = $8 and quantity of birthday cakes produced a day is 20.

The marginal cost of producing fish increases by $.01 with each additional fish. The marginal cost of the first fish is $.01, for the second it is $.02, etc. If the market price for fish is $7 per fish and your total fixed cost is $7,000, you should

A fishing boat owner sells her entire catch of 8,000 fish and maximizes profit that is equal to $4,000. Suppose fish prices increase and she now sells 10,000 fish. If fish prices increased by $1 per fish, what do you need to know to calculate her new average totalcost?

-In Exhibit I-3, a firm is currently producing 45 units. What would you advise this firm to do?

If price is greater than average variable cost, then the firm

For the level of output, Q, firm profit is the same whether measured by TR - TC or (AR - AVC) * Q.

When price is constant, the average revenue curve is a(n)

If price is unchanging across the firm's entire production range, then for the firm selling bagels at $0.40 each,

The Skandusky Downtown Development Corporation (SDDC), a nonprofit entity, was accused by local taxpayers of being overstaffed and too lavishly accommodated for its purpose of achieving its community development goals. This accusation is an argument that the SDDC

Introduction

Production Possibilities and Opportunity Costs

Demand and Supply

Elasticity

Happiness, Utility, and Consumer Choice

Price Ceilings and Price Floors

Entrepreneurship and Business Ownership

Costs of Production

Identifying Markets and Market Structures

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

Price and Output Determination Under Oligopoly

Antitrust and Regulation

Externalities, Market Failure, and Public Choice

Wage Rates in Competitive Labor Markets

Wages and Employment: Monopsony and Labor Unions

Interest, Rent, and Profit

Income Distribution and Poverty

International Trade

Exchange Rates, Balance of Payments, and International Debt

The Economic Problems of Less-Developed Economies

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