Question 1

Marginal profit is the slope of the total profit curve.

Accepted Answer

A) True 
 B)False  True

Question 2

If a firm's fixed cost (overhead) increases, what happens to its profit-maximizing price and output?

Accepted Answer

Nothing.Whatever output was most profitable before the increase in fixed costs must still be most profitable because total profit is reduced by the same amount at each and every output level and marginal cost has not changed.

Question 3

If marginal cost of an additional unit of output is greater than average cost, then average cost will rise.

Accepted Answer

A) True 
 B)False  True

Question 4

Economists assume that business firms have many goals, and profit maximization is just one of them.

Accepted Answer

A) True 
 B)False

Question 5

Management gets two numbers (price and quantity) from one decision because

Accepted Answer

A) the marginal utility of goods is fixed. 
B) producers use both technical and financial information. 
C) the demand curve consists of price and quantity pairs. 
D) the average cost curve has only one low point. 
A) the marginal utility of goods is fixed. 
B) producers use both technical and financial information. 
C) the demand curve consists of price and quantity pairs. 
D) the average cost curve has only one low point.

Question 6

Figure 8-1
  
-Which graph in Figure 8-1 shows a typical firm's total revenue and total cost curves?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
A) (a) 
B) (b) 
C) (c) 
D) (d)

Question 7

A firm that sells at a price below average cost is losing money.

Accepted Answer

A) True 
 B)False

Question 8

Figure 8-5
  
-From Figure 8-5 one can deduce

Accepted Answer

A) TR = TC at outputs 10 and 60. 
B) MR = MC at output 35. 
C) TFC = 100. 
D) All of the above are correct. 
A) TR = TC at outputs 10 and 60. 
B) MR = MC at output 35. 
C) TFC = 100. 
D) All of the above are correct.

Question 9

Average cost equals total cost multiplied by the number of units of output.

Accepted Answer

A) True 
 B)False

Question 10

Thomas Edison once said that he began making real profit on light bulbs when he dumped his surplus on the European market at less than the "cost of production." From this we can deduce Edison

Accepted Answer

A) did not want to maximize profit. 
B) understood the difference between marginal and average cost. 
C) had a different definition of the term "profit." 
D) did not understand the difference between fixed and variable cost. 
A) did not want to maximize profit. 
B) understood the difference between marginal and average cost. 
C) had a different definition of the term "profit." 
D) did not understand the difference between fixed and variable cost.

Question 11

Herbert Simon has concluded that decision making in industry is often best described as

Accepted Answer

A) optimizing behavior. 
B) profit maximizing. 
C) satisficing. 
D) saturating. 
A) optimizing behavior. 
B) profit maximizing. 
C) satisficing. 
D) saturating.

Question 12

When marginal cost exceeds marginal revenue,

Accepted Answer

A) marginal profit  marginal revenue. 
D) marginal cost < marginal revenue − marginal profit. 
A) marginal profit  marginal revenue. 
D) marginal cost < marginal revenue − marginal profit.

Question 13

Most consumers in stores use marginal analysis to make their buying decisions.

Accepted Answer

A) True 
 B)False

Question 14

Marginal, average, and total figures are unrelated.

Accepted Answer

A) True 
 B)False

Question 15

A profit-maximizing firm always

Accepted Answer

A) sells its output at P = MR. 
B) produces at the output at which MR = 0. 
C) hires labor until the MRP of labor = 0. 
D) produces every unit of output for which MR > MC. 
A) sells its output at P = MR. 
B) produces at the output at which MR = 0. 
C) hires labor until the MRP of labor = 0. 
D) produces every unit of output for which MR > MC.

Question 16

The typical total profit graphical presentation is shown as

Accepted Answer

A) a square. 
B) a rectangle. 
C) a hill, or mound. 
D) an S curve. 
A) a square. 
B) a rectangle. 
C) a hill, or mound. 
D) an S curve.

Question 17

Complete the following table and determine the point of profit maximization.

Accepted Answer

@#IMG-DLM&
The profit-maximizing output is Q = 104

Question 18

Marginal cost is defined by the slope of the total revenue curve.

Accepted Answer

A) True 
 B)False

Question 19

If the marginal profit from increasing output by one unit is negative, then to attain an optimum the firm should

Accepted Answer

A) increase output until marginal profit equals zero. 
B) reduce output until marginal profit equals zero. 
C) increase output until marginal profit is maximized. 
D) reduce output until marginal profit is maximized. 
A) increase output until marginal profit equals zero. 
B) reduce output until marginal profit equals zero. 
C) increase output until marginal profit is maximized. 
D) reduce output until marginal profit is maximized.

Question 20

If a person who weighs 100 lbs.is riding in an elevator and is joined by a person weighing 120 lbs., what happens to the average weight of persons on the elevator?

Accepted Answer

A) It falls. 
B) It rises. 
C) It stays the same. 
A) It falls. 
B) It rises. 
C) It stays the same.

Exam 8: Output, Price, and Profit: the Importance of Marginal Analysis

Marginal profit is the slope of the total profit curve.

If a firm's fixed cost (overhead) increases, what happens to its profit-maximizing price and output?

If marginal cost of an additional unit of output is greater than average cost, then average cost will rise.

Economists assume that business firms have many goals, and profit maximization is just one of them.

Management gets two numbers (price and quantity) from one decision because

Figure 8-1 -Which graph in Figure 8-1 shows a typical firm's total revenue and total cost curves?

A firm that sells at a price below average cost is losing money.

Figure 8-5 -From Figure 8-5 one can deduce

Average cost equals total cost multiplied by the number of units of output.

Thomas Edison once said that he began making real profit on light bulbs when he dumped his surplus on the European market at less than the "cost of production." From this we can deduce Edison

Herbert Simon has concluded that decision making in industry is often best described as

When marginal cost exceeds marginal revenue,

Most consumers in stores use marginal analysis to make their buying decisions.

Marginal, average, and total figures are unrelated.

A profit-maximizing firm always

The typical total profit graphical presentation is shown as

Complete the following table and determine the point of profit maximization.

Marginal cost is defined by the slope of the total revenue curve.

If the marginal profit from increasing output by one unit is negative, then to attain an optimum the firm should

If a person who weighs 100 lbs.is riding in an elevator and is joined by a person weighing 120 lbs., what happens to the average weight of persons on the elevator?

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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