Question 1

Producing where MR = MC guarantees that the firm earns a profit.

Accepted Answer

A) True 
 B)False

Question 2

If the total cost curve is greater than the total revenue curve at every level of output, the firm incurs a loss.

Accepted Answer

A) True 
 B)False

Question 3

-In Exhibit I-2, the firm is currently producing 14 units. What would you advise this firm to do?

Accepted Answer

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

Question 4

If, at its profit-maximizing output level, the price of the good is less than average variable cost, the firm should shut down immediately.

Accepted Answer

A) True 
 B)False

Question 5

Suppose Al, Betty, and Carl own the only fishing companies in your village. Suppose the market price today is $10 per fish. Suppose Al catches 4,000 fish with an average total cost of $7.50, Betty catches 6,000 fish with an average total cost of $6, and Carl catches 10,000 fish with an average total cost of $5. What is the average profit per fish in thevillage today?

Accepted Answer

A)  $2.40 
B)  $4.20 
C)  $3.80 
D)  $2 
E)  $5 
A)  $2.40 
B)  $4.20 
C)  $3.80 
D)  $2 
E)  $5

Question 6

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

Accepted Answer

A)  profit will increase to infinity 
B)  profit will increase 
C)  profit will decrease 
D)  profit will remain unchanged 
E)  loss will be minimized 
A)  profit will increase to infinity 
B)  profit will increase 
C)  profit will decrease 
D)  profit will remain unchanged 
E)  loss will be minimized

Question 7

It's logical, it's a rule of thumb, it's an economic guideline: By producing at a quantity where MR = MC,

Accepted Answer

A)  profit is guaranteed 
B)  profit becomes zero 
C)  the firm incurs a loss 
D)  profit is maximized (or loss minimized) 
E)  the firm should increase quantity 
A)  profit is guaranteed 
B)  profit becomes zero 
C)  the firm incurs a loss 
D)  profit is maximized (or loss minimized) 
E)  the firm should increase quantity

Question 8

A doorknob manufacturer sells 400 doorknobs at a price of $10 each. It has total costs of $4,500, of which $700 are fixed costs. This means the firm

Accepted Answer

A)  has an economic profit of $500 
B)  should produce in the short run at a loss 
C)  should shut down in the short run 
D)  has total variable costs of $500 
E)  has price less than average variable cost 
A)  has an economic profit of $500 
B)  should produce in the short run at a loss 
C)  should shut down in the short run 
D)  has total variable costs of $500 
E)  has price less than average variable cost

Question 9

Suppose a firm notices that the price it faces has doubled, but it does not change its level of output. It must be the case that

Accepted Answer

A)  profits have doubled 
B)  the marginal cost curve is falling 
C)  total revenue has decreased 
D)  the original price was less than half of the minimum of the AVC curve 
E)  this situation would not really occur 
A)  profits have doubled 
B)  the marginal cost curve is falling 
C)  total revenue has decreased 
D)  the original price was less than half of the minimum of the AVC curve 
E)  this situation would not really occur

Question 10

Considering production decisions for only the short run, a firm producing where MC = MR should stop producing if

Accepted Answer

A)  its losses are less than TFC 
B)  its losses equal TFC 
C)  its losses are greater than TFC 
D)  TR is less than TC 
E)  TR exceeds TVC 
A)  its losses are less than TFC 
B)  its losses equal TFC 
C)  its losses are greater than TFC 
D)  TR is less than TC 
E)  TR exceeds TVC

Question 11

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. The slope of the line represents

Accepted Answer

A)  b and e 
B)  marginal revenue 
C)  average variable costs 
D)  total revenue 
E)  price 
A)  b and e 
B)  marginal revenue 
C)  average variable costs 
D)  total revenue 
E)  price

Question 12

Explain the circumstances under which a firm will produce output while incurring a short-run loss, and the circumstances under which it will shut down while incurring a short-run loss.

Accepted Answer

If a firm can cover its variable costs b

Question 13

Suppose an entrepreneur commits to a production schedule but underestimates the market price for his products. What will be true about his current level of production?

Accepted Answer

A)  Losses will be very high. 
B)  Marginal cost will be less than marginal revenue. 
C)  Marginal cost will be more than marginal revenue. 
D)  Average total cost will exceed price. 
E)  Total fixed costs will be too low. 
A)  Losses will be very high. 
B)  Marginal cost will be less than marginal revenue. 
C)  Marginal cost will be more than marginal revenue. 
D)  Average total cost will exceed price. 
E)  Total fixed costs will be too low.

Question 14

Suppose Al, Betty, and Carl own the only fishing companies in your village. Suppose the market price today is $10 per fish. Suppose Al catches 4,000 fish with an average totalcost of $7.50, Betty catches 6,000 fish with an average total cost of $6, and Carl catches10,000 fish with an average total cost of $7. How much would Betty's average total cost have to fall in order for her to make as much total profit as Carl?

Accepted Answer

A)  $1 
B)  $2 
C)  $4 
D)  $5 
E)  Betty cannot make as much profit as Carl with only 6,000 fish. 
A)  $1 
B)  $2 
C)  $4 
D)  $5 
E)  Betty cannot make as much profit as Carl with only 6,000 fish.

Question 15

How did the advent of the modern corporation reduce the likelihood that a firm's goal is to maximize profit? What has replaced this goal?

Accepted Answer

The corporation separates owners-stockho

Question 16

Adam Smith believed that the rich derive the most enjoyment from their wealth by knowing that others observe their consumption.

Accepted Answer

A) True 
 B)False

Question 17

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. The firm's total profit is calculated by

Accepted Answer

A)  P - AVC 
B)  P - ATC 
C)  P - MC 
D)  (P - AT
C) Q 
E)  TR - TVC 
A)  P - AVC 
B)  P - ATC 
C)  P - MC 
D)  (P - AT
C) Q 
E)  TR - TVC

Question 18

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 you are asked to calculate her profit knowing that she now sells 10,000 fish. If fish prices increased by $1 per fish, what do you need to know to calculate her new profit level?

Accepted Answer

A)  average fixed cost 
B)  average variable cost 
C)  change in average total cost 
D)  marginal cost 
E)  average total cost 
A)  average fixed cost 
B)  average variable cost 
C)  change in average total cost 
D)  marginal cost 
E)  average total cost

Question 19

Whatever else you learned about profit-maximization, you should have learned this: Maximum profit is obtained at the production level where

Accepted Answer

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

Question 20

Total revenue is a term economists use to describe the

Accepted Answer

A)  price the firm charges for its goods 
B)  money remaining after costs are paid 
C)  average profit earned per good sold 
D)  total profit earned by the firm 
E)  money the firm receives selling its goods 
A)  price the firm charges for its goods 
B)  money remaining after costs are paid 
C)  average profit earned per good sold 
D)  total profit earned by the firm 
E)  money the firm receives selling its goods

Producing where MR = MC guarantees that the firm earns a profit.

If the total cost curve is greater than the total revenue curve at every level of output, the firm incurs a loss.

-In Exhibit I-2, the firm is currently producing 14 units. What would you advise this firm to do?

If, at its profit-maximizing output level, the price of the good is less than average variable cost, the firm should shut down immediately.

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

It's logical, it's a rule of thumb, it's an economic guideline: By producing at a quantity where MR = MC,

A doorknob manufacturer sells 400 doorknobs at a price of $10 each. It has total costs of $4,500, of which $700 are fixed costs. This means the firm

Suppose a firm notices that the price it faces has doubled, but it does not change its level of output. It must be the case that

Considering production decisions for only the short run, a firm producing where MC = MR should stop producing if

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. The slope of the line represents

Explain the circumstances under which a firm will produce output while incurring a short-run loss, and the circumstances under which it will shut down while incurring a short-run loss.

Suppose an entrepreneur commits to a production schedule but underestimates the market price for his products. What will be true about his current level of production?

How did the advent of the modern corporation reduce the likelihood that a firm's goal is to maximize profit? What has replaced this goal?

Adam Smith believed that the rich derive the most enjoyment from their wealth by knowing that others observe their consumption.

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. The firm's total profit is calculated by

Whatever else you learned about profit-maximization, you should have learned this: Maximum profit is obtained at the production level where

Total revenue is a term economists use to describe the

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

Filters

Exam 9: Maximizing Profit

Producing where MR = MC guarantees that the firm earns a profit.

If the total cost curve is greater than the total revenue curve at every level of output, the firm incurs a loss.

-In Exhibit I-2, the firm is currently producing 14 units. What would you advise this firm to do?

If, at its profit-maximizing output level, the price of the good is less than average variable cost, the firm should shut down immediately.

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

It's logical, it's a rule of thumb, it's an economic guideline: By producing at a quantity where MR = MC,

A doorknob manufacturer sells 400 doorknobs at a price of $10 each. It has total costs of $4,500, of which $700 are fixed costs. This means the firm

Suppose a firm notices that the price it faces has doubled, but it does not change its level of output. It must be the case that

Considering production decisions for only the short run, a firm producing where MC = MR should stop producing if

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. The slope of the line represents

Explain the circumstances under which a firm will produce output while incurring a short-run loss, and the circumstances under which it will shut down while incurring a short-run loss.

Suppose an entrepreneur commits to a production schedule but underestimates the market price for his products. What will be true about his current level of production?

How did the advent of the modern corporation reduce the likelihood that a firm's goal is to maximize profit? What has replaced this goal?

Adam Smith believed that the rich derive the most enjoyment from their wealth by knowing that others observe their consumption.

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. The firm's total profit is calculated by

Whatever else you learned about profit-maximization, you should have learned this: Maximum profit is obtained at the production level where

Total revenue is a term economists use to describe the

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

Filters