Question 1

Price = MR only if the price is fixed.

Accepted Answer

A) True 
 B)False

Question 2

Suppose a fishing boat currently brings 10,000 fish to market and earns a profit of$40,000 when the price of fish is $8. Suppose the boat dealer had overcharged the boat owner for the boat and refunded the overcharged amount. If the profit increases to $7.50per fish, what was the value of the refund from the dealer?

Accepted Answer

A)  $2.50 
B)  $25,000 
C)  $3.50 
D)  $35,000 
E)  $75,000 
A)  $2.50 
B)  $25,000 
C)  $3.50 
D)  $35,000 
E)  $75,000

Question 3

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 = $10, and quantity of birthday cakes produced a day is 20.You conclude that the bakery ends up at the end of the day with a

Accepted Answer

A)  loss of $10 
B)  profit of $10 
C)  loss of $20 
D)  no loss, no profit 
E)  loss of $40 
A)  loss of $10 
B)  profit of $10 
C)  loss of $20 
D)  no loss, no profit 
E)  loss of $40

Question 4

If price increases by 10 percent and a firm is maximizing profits, output will

Accepted Answer

A)  increase by 10 percent 
B)  decrease by 10 percent 
C)  remain unchanged 
D)  increase, but we don't know by how much 
E)  decrease, but we don't know by how much 
A)  increase by 10 percent 
B)  decrease by 10 percent 
C)  remain unchanged 
D)  increase, but we don't know by how much 
E)  decrease, but we don't know by how much

Question 5

If MR = MC, then TR and TC differ by a maximum if positive profits are earned.

Accepted Answer

A) True 
 B)False

Question 6

Following the MC = MR rule to profit maximization tells us how much profit can be made.

Accepted Answer

A) True 
 B)False

Question 7

If MR > MC, a profit-maximizing firm should increase output.

Accepted Answer

A) True 
 B)False

Question 8

If TR > TC, the firm should produce more of whatever it is producing.

Accepted Answer

A) True 
 B)False

Question 9

Which controversy developed over a disagreement about how managers make profit maximizing production decisions?

Accepted Answer

A)  Lester-Satlow 
B)  Lester-Machlup 
C)  Friedman-Lester 
D)  Friedman-Phelps 
E)  Kalecki-Gottheil 
A)  Lester-Satlow 
B)  Lester-Machlup 
C)  Friedman-Lester 
D)  Friedman-Phelps 
E)  Kalecki-Gottheil

Question 10

J. J. Joubert, of the Joubert Dairy, tells his friend Jacques that the average revenue he gets for a liter of milk is $1. We know then that $1 is the dairy's

Accepted Answer

A)  marginal profit 
B)  marginal cost 
C)  price 
D)  total revenue 
E)  total profit 
A)  marginal profit 
B)  marginal cost 
C)  price 
D)  total revenue 
E)  total profit

Question 11

-In Exhibit I-6 (on the previous page), the price is fixed at $35. The firm is producing where MR = MC. What do you advise this firm to do in the short run?

Accepted Answer

A)  Shut down. 
B)  Increase output. 
C)  Decrease output. 
D)  Stay at its current output. 
E)  Decrease price. 
A)  Shut down. 
B)  Increase output. 
C)  Decrease output. 
D)  Stay at its current output. 
E)  Decrease price.

Question 12

Marginal analysis requires that business people who make production decisions always

Accepted Answer

A)  know what average fixed costs are 
B)  remember what has happened most recently 
C)  remain forward looking 
D)  continue producing 
E)  remain optimistic 
A)  know what average fixed costs are 
B)  remember what has happened most recently 
C)  remain forward looking 
D)  continue producing 
E)  remain optimistic

Question 13

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

Accepted Answer

A)  No; average total costs have increased which means the company is not minimizing losses. 
B)  Yes; because average variable costs are always less than average total costs. 
C)  No; because the marginal cost of producing the last unit is the same as the marginal revenue. 
D)  Yes; even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units. 
E)  No; the previous level of output was the most efficient because it had the lowest average total cost. 
A)  No; average total costs have increased which means the company is not minimizing losses. 
B)  Yes; because average variable costs are always less than average total costs. 
C)  No; because the marginal cost of producing the last unit is the same as the marginal revenue. 
D)  Yes; even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units. 
E)  No; the previous level of output was the most efficient because it had the lowest average total cost.

Question 14

-Refer to Exhibit I-10 on the following page. If the firm in the exhibit can sell its output for $1 per unit, should it produce 1,500 or 2,100 units of output? Explain.

Accepted Answer

To maximize profit, this firm

Question 15

-In Exhibit I-8, what quantity would you produce to maximize profit?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
E)  4 
A)  0 
B)  1 
C)  2 
D)  3 
E)  4

Question 16

Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000. If the price jumps to $3.50 before you sell your first fish, how much extra profit, if any, do you earn?

Accepted Answer

A)  c and d 
B)  Extra profit is zero. 
C)  Extra profit is enough to cover half of the fixed cost of your next trip. 
D)  Extra profit is enough to cover all of the variable costs of your next two trips. 
E)  Extra profit is $45,000. 
A)  c and d 
B)  Extra profit is zero. 
C)  Extra profit is enough to cover half of the fixed cost of your next trip. 
D)  Extra profit is enough to cover all of the variable costs of your next two trips. 
E)  Extra profit is $45,000.

Question 17

-Suppose, in Exhibit I-2, that the firm is maximizing profit. How much profit is itearning?

Accepted Answer

A)  zero 
B)  $1 
C)  $16 
D)  -$16 
E)  insufficient data to determine profit 
A)  zero 
B)  $1 
C)  $16 
D)  -$16 
E)  insufficient data to determine profit

Question 18

Marginal cost is always greater than zero, regardless of the output level.

Accepted Answer

A) True 
 B)False

Question 19

The profit outcome achieved by setting MC = MR is the same as that achieved by setting TR = TC.

Accepted Answer

A) True 
 B)False

Question 20

It is clear from the text that most economists assume the primary goal of all firms is to

Accepted Answer

A)  maximize sales 
B)  minimize cost 
C)  maximize efficiency 
D)  maximize profit 
E)  minimize loss 
A)  maximize sales 
B)  minimize cost 
C)  maximize efficiency 
D)  maximize profit 
E)  minimize loss

Price = MR only if the price is fixed.

If price increases by 10 percent and a firm is maximizing profits, output will

If MR = MC, then TR and TC differ by a maximum if positive profits are earned.

Following the MC = MR rule to profit maximization tells us how much profit can be made.

If MR > MC, a profit-maximizing firm should increase output.

If TR > TC, the firm should produce more of whatever it is producing.

Which controversy developed over a disagreement about how managers make profit maximizing production decisions?

J. J. Joubert, of the Joubert Dairy, tells his friend Jacques that the average revenue he gets for a liter of milk is $1. We know then that $1 is the dairy's

-In Exhibit I-6 (on the previous page), the price is fixed at $35. The firm is producing where MR = MC. What do you advise this firm to do in the short run?

Marginal analysis requires that business people who make production decisions always

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

-Refer to Exhibit I-10 on the following page. If the firm in the exhibit can sell its output for $1 per unit, should it produce 1,500 or 2,100 units of output? Explain.

-In Exhibit I-8, what quantity would you produce to maximize profit?

Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000. If the price jumps to $3.50 before you sell your first fish, how much extra profit, if any, do you earn?

-Suppose, in Exhibit I-2, that the firm is maximizing profit. How much profit is itearning?

Marginal cost is always greater than zero, regardless of the output level.

The profit outcome achieved by setting MC = MR is the same as that achieved by setting TR = TC.

It is clear from the text that most economists assume the primary goal of all firms is to

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

Price = MR only if the price is fixed.

If price increases by 10 percent and a firm is maximizing profits, output will

If MR = MC, then TR and TC differ by a maximum if positive profits are earned.

Following the MC = MR rule to profit maximization tells us how much profit can be made.

If MR > MC, a profit-maximizing firm should increase output.

If TR > TC, the firm should produce more of whatever it is producing.

Which controversy developed over a disagreement about how managers make profit maximizing production decisions?

J. J. Joubert, of the Joubert Dairy, tells his friend Jacques that the average revenue he gets for a liter of milk is $1. We know then that $1 is the dairy's

-In Exhibit I-6 (on the previous page), the price is fixed at $35. The firm is producing where MR = MC. What do you advise this firm to do in the short run?

Marginal analysis requires that business people who make production decisions always

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

-Refer to Exhibit I-10 on the following page. If the firm in the exhibit can sell its output for $1 per unit, should it produce 1,500 or 2,100 units of output? Explain.

-In Exhibit I-8, what quantity would you produce to maximize profit?

Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000. If the price jumps to $3.50 before you sell your first fish, how much extra profit, if any, do you earn?

-Suppose, in Exhibit I-2, that the firm is maximizing profit. How much profit is itearning?

Marginal cost is always greater than zero, regardless of the output level.

The profit outcome achieved by setting MC = MR is the same as that achieved by setting TR = TC.

It is clear from the text that most economists assume the primary goal of all firms is to

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