Question 1

You're called in as a consultant: Price is $24. At a production level of 200 units, MC = MR, AFC = $6, and AVC = $25. What do you advise this firm to do?

Accepted Answer

A)  Increase output. 
B)  Decrease output. 
C)  Shut down operations. 
D)  Stay at the current output; the firm is earning a profit of $1,400. 
E)  Stay at the current output; the firm is losing $1,400. 
A)  Increase output. 
B)  Decrease output. 
C)  Shut down operations. 
D)  Stay at the current output; the firm is earning a profit of $1,400. 
E)  Stay at the current output; the firm is losing $1,400.

Question 2

All economists agree that the firm's only goal is to maximize profit.

Accepted Answer

A) True 
 B)False

Question 3

An entrepreneur can be fairly certain about some factors associated with production, but is most likely to use guesswork or intuition to estimate

Accepted Answer

A)  wage rate 
B)  monthly rent 
C)  price 
D)  labor productivity 
E)  interest rate 
A)  wage rate 
B)  monthly rent 
C)  price 
D)  labor productivity 
E)  interest rate

Question 4

According to William Baumol, many corporate managers engage in empire-building.

Accepted Answer

A) True 
 B)False

Question 5

A fishing boat owner sells her entire catch of 20,000 fish and maximizes profit that is equal to $7,000. Suppose fish prices increase and you are asked to calculate her profit knowing that she now sells 30,000 fish. If fish prices increased by $3 per fish, what canyou say about her new profit level?

Accepted Answer

A)  profit > $90,000 
B)  profit  $67,000 
E)  profit > $10,500 
A)  profit > $90,000 
B)  profit  $67,000 
E)  profit > $10,500

Question 6

-In Exhibit I-1, if the firm charges $18, total revenue will equal

Accepted Answer

A)  $12 
B)  $18 
C)  $108 
D)  $216 
E)  $324 
A)  $12 
B)  $18 
C)  $108 
D)  $216 
E)  $324

Question 7

The town of Marshall's Boy Scout Troop 1099 decreased car parking prices at the Celebrate Marshall Festival and found they made higher profits. This likely occurred because

Accepted Answer

A)  marginal cost was equal to marginal revenue 
B)  marginal revenue was higher than marginal cost 
C)  marginal revenue was less than marginal cost 
D)  demand was inelastic 
E)  marginal revenue was increasing 
A)  marginal cost was equal to marginal revenue 
B)  marginal revenue was higher than marginal cost 
C)  marginal revenue was less than marginal cost 
D)  demand was inelastic 
E)  marginal revenue was increasing

Question 8

Consider a firm with the following cost and revenue information: ATC = $20,AVC = $10, and P = MR = $30. If the firm follows the rule to maximize profits, its output level is 3. Therefore MC equals

Accepted Answer

A)  $20 
B)  $10 
C)  $30 
D)  $90 
E)  $3 
A)  $20 
B)  $10 
C)  $30 
D)  $90 
E)  $3

Question 9

There may be other goals an entrepreneur pursues, but the primary goal of the entrepreneur is to maximize

Accepted Answer

A)  market share 
B)  production 
C)  the difference between price and cost 
D)  profit 
E)  size of the firm's plant 
A)  market share 
B)  production 
C)  the difference between price and cost 
D)  profit 
E)  size of the firm's plant

Question 10

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. Upon receiving a refund of $25,000 from the dealer, what will happen to the AVC of producing 10,000 fish?

Accepted Answer

A)  increases by $25 
B)  increases by $2.50 
C)  does not change 
D)  decreases by $2.50 
E)  decreases by $25 
A)  increases by $25 
B)  increases by $2.50 
C)  does not change 
D)  decreases by $2.50 
E)  decreases by $25

Question 11

-In Exhibit I-8, when the firm produces a quantity of 2, its total revenue is

Accepted Answer

A)  $2 
B)  $12 
C)  $24 
D)  $10 
E)  $14 
A)  $2 
B)  $12 
C)  $24 
D)  $10 
E)  $14

Question 12

The lesson learned from the discussion about kibbutzim in your textbook is that organizations which are controlled by people who place a low value on acquiring material things

Accepted Answer

A)  do not maximize profit 
B)  only produce enough to survive 
C)  cannot compete in a capitalist society 
D)  have religious convictions against profit 
E)  still maximize profit 
A)  do not maximize profit 
B)  only produce enough to survive 
C)  cannot compete in a capitalist society 
D)  have religious convictions against profit 
E)  still maximize profit

Question 13

-In Exhibit I-6, the price is fixed at $35. This firm is currently operating where MR = MC. Which of the following is true in the short run?

Accepted Answer

A)  Price  ATC and the firm is earning a positive profit. 
E)  Price > AVC, and the firm should stay at its current output. 
A)  Price  ATC and the firm is earning a positive profit. 
E)  Price > AVC, and the firm should stay at its current output.

Question 14

Picture the curve. The total revenue curve originates at the origin.

Accepted Answer

A) True 
 B)False

Question 15

If the price doesn't change, no matter how much output is produced, the total revenue curve is a(n)

Accepted Answer

A)  upward-sloping straight line 
B)  downward-sloping straight line 
C)  horizontal straight line 
D)  U-shaped curve 
E)  hill-shaped curve 
A)  upward-sloping straight line 
B)  downward-sloping straight line 
C)  horizontal straight line 
D)  U-shaped curve 
E)  hill-shaped curve

Question 16

John K. Galbraith and Lester Thurow both believe that the modern corporation

Accepted Answer

A)  follows the MR = MC rule 
B)  tries to minimize costs 
C)  hires too few managers 
D)  is run by managers for managers 
E)  serves the interests of stockholders 
A)  follows the MR = MC rule 
B)  tries to minimize costs 
C)  hires too few managers 
D)  is run by managers for managers 
E)  serves the interests of stockholders

Question 17

Think about a publishing firm that uses labor, ink, paper, and electricity as its variable inputs, and rents building space and printing presses as its fixed inputs. Describe how this publisher's short-run response to an increase in its labor costs would differ from its short-run response to an increase in one of its fixed costs.

Accepted Answer

Although both types of cost increases wi

Question 18

When a business finds its obligations are ended,

Accepted Answer

A)  all costs are variable costs 
B)  this is the short run 
C)  the market price of the output rises 
D)  the marginal cost curve shifts up 
E)  it may have to continue operations to minimize losses 
A)  all costs are variable costs 
B)  this is the short run 
C)  the market price of the output rises 
D)  the marginal cost curve shifts up 
E)  it may have to continue operations to minimize losses

Question 19

If a firm's marginal revenue is equal to marginal cost at an output level where average variable cost is rising, the firm should shut down.

Accepted Answer

A) True 
 B)False

Question 20

Adam Smith believed that the rich man enjoys his riches primarily because he gets great pleasure from

Accepted Answer

A)  the goods and services he can buy 
B)  his donations to charity 
C)  leaving an inheritance to his heirs 
D)  the attention he gets from others 
E)  his easy life of leisure 
A)  the goods and services he can buy 
B)  his donations to charity 
C)  leaving an inheritance to his heirs 
D)  the attention he gets from others 
E)  his easy life of leisure

You're called in as a consultant: Price is $24. At a production level of 200 units, MC = MR, AFC = $6, and AVC = $25. What do you advise this firm to do?

All economists agree that the firm's only goal is to maximize profit.

An entrepreneur can be fairly certain about some factors associated with production, but is most likely to use guesswork or intuition to estimate

According to William Baumol, many corporate managers engage in empire-building.

A fishing boat owner sells her entire catch of 20,000 fish and maximizes profit that is equal to $7,000. Suppose fish prices increase and you are asked to calculate her profit knowing that she now sells 30,000 fish. If fish prices increased by $3 per fish, what canyou say about her new profit level?

-In Exhibit I-1, if the firm charges $18, total revenue will equal

The town of Marshall's Boy Scout Troop 1099 decreased car parking prices at the Celebrate Marshall Festival and found they made higher profits. This likely occurred because

Consider a firm with the following cost and revenue information: ATC = $20,AVC = $10, and P = MR = $30. If the firm follows the rule to maximize profits, its output level is 3. Therefore MC equals

There may be other goals an entrepreneur pursues, but the primary goal of the entrepreneur is to maximize

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. Upon receiving a refund of $25,000 from the dealer, what will happen to the AVC of producing 10,000 fish?

-In Exhibit I-8, when the firm produces a quantity of 2, its total revenue is

The lesson learned from the discussion about kibbutzim in your textbook is that organizations which are controlled by people who place a low value on acquiring material things

-In Exhibit I-6, the price is fixed at $35. This firm is currently operating where MR = MC. Which of the following is true in the short run?

Picture the curve. The total revenue curve originates at the origin.

If the price doesn't change, no matter how much output is produced, the total revenue curve is a(n)

John K. Galbraith and Lester Thurow both believe that the modern corporation

When a business finds its obligations are ended,

If a firm's marginal revenue is equal to marginal cost at an output level where average variable cost is rising, the firm should shut down.

Adam Smith believed that the rich man enjoys his riches primarily because he gets great pleasure from

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

You're called in as a consultant: Price is $24. At a production level of 200 units, MC = MR, AFC = $6, and AVC = $25. What do you advise this firm to do?

All economists agree that the firm's only goal is to maximize profit.

An entrepreneur can be fairly certain about some factors associated with production, but is most likely to use guesswork or intuition to estimate

According to William Baumol, many corporate managers engage in empire-building.

-In Exhibit I-1, if the firm charges $18, total revenue will equal

The town of Marshall's Boy Scout Troop 1099 decreased car parking prices at the Celebrate Marshall Festival and found they made higher profits. This likely occurred because

Consider a firm with the following cost and revenue information: ATC = $20,AVC = $10, and P = MR = $30. If the firm follows the rule to maximize profits, its output level is 3. Therefore MC equals

There may be other goals an entrepreneur pursues, but the primary goal of the entrepreneur is to maximize

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. Upon receiving a refund of $25,000 from the dealer, what will happen to the AVC of producing 10,000 fish?

-In Exhibit I-8, when the firm produces a quantity of 2, its total revenue is

The lesson learned from the discussion about kibbutzim in your textbook is that organizations which are controlled by people who place a low value on acquiring material things

-In Exhibit I-6, the price is fixed at $35. This firm is currently operating where MR = MC. Which of the following is true in the short run?

Picture the curve. The total revenue curve originates at the origin.

If the price doesn't change, no matter how much output is produced, the total revenue curve is a(n)

John K. Galbraith and Lester Thurow both believe that the modern corporation

When a business finds its obligations are ended,

If a firm's marginal revenue is equal to marginal cost at an output level where average variable cost is rising, the firm should shut down.

Adam Smith believed that the rich man enjoys his riches primarily because he gets great pleasure from

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