Question 1

Marginal profit is the additional profit that accrues to the firm when the output rises by one unit.

Accepted Answer

A) True 
 B)False

Question 2

Net benefit is equal to total benefit minus marginal cost.

Accepted Answer

A) True 
 B)False

Question 3

Why assume that firms maximize profit, when it is easy to find companies that pursue other goals such as saving rain forests (Ben and Jerry's) and sponsoring Mister Rogers (Sears)?

Accepted Answer

Assuming that the two cited firms are no

Question 4

Assume that you have taken over management of a small concession stand on a local beach for the summer.Your main product is iced water, popular on hot days.You've been selling 400 cups per day at 50 cents each.The cups cost 5 cents each.One of your customers suggests that you cut the price to 40 cents to make more money.For the customer to be correct, how much must your sales increase?

Accepted Answer

The original profit was 50Q − 5Q = 45Q.T

Question 5

The difference between economic profit and accountant's definition of profit is that an economist's total cost counts the ____ of inputs.

Accepted Answer

A) absolute value 
B) overheads 
C) opportunity cost 
D) gross cost 
A) absolute value 
B) overheads 
C) opportunity cost 
D) gross cost

Question 6

If a profit-maximizing firm's fixed cost of producing widgets falls,

Accepted Answer

A) its total cost curve is unaffected. 
B) its marginal cost curve shifts down. 
C) the firm will produce more widgets. 
D) the firm's average profit per widget produced rises. 
A) its total cost curve is unaffected. 
B) its marginal cost curve shifts down. 
C) the firm will produce more widgets. 
D) the firm's average profit per widget produced rises.

Question 7

Economists and accountants have very different definitions of profit.

Accepted Answer

A) True 
 B)False

Question 8

Many large universities rent out parts of their campuses to conference groups during the summer because such groups cause little damage, require little staff attention, and bring in large amounts of income.A university's decision to rent its campus to a conference group is most clearly based on

Accepted Answer

A) the idea that price and quantity selection is a single decision. 
B) the principle of decreasing returns to scale. 
C) marginal analysis. 
D) average cost considerations. 
A) the idea that price and quantity selection is a single decision. 
B) the principle of decreasing returns to scale. 
C) marginal analysis. 
D) average cost considerations.

Question 9

If marginal profit is zero, then average profit is at a maximum.

Accepted Answer

A) True 
 B)False

Question 10

Regarding the relationship between marginal profit and average profit, which of the following statements is NOT true?

Accepted Answer

A) ​If the average profit is rising, the marginal profit figure must be rising. 
B) ​If marginal profit is lower than average profit, then average profit must decrease when profit increases. 
C) ​If marginal profit is below average profit, the average profit decreases. 
D) ​All of these statements are true. 
A) ​If the average profit is rising, the marginal profit figure must be rising. 
B) ​If marginal profit is lower than average profit, then average profit must decrease when profit increases. 
C) ​If marginal profit is below average profit, the average profit decreases. 
D) ​All of these statements are true.

Question 11

The average revenue curve can also be described as the demand curve.

Accepted Answer

A) True 
 B)False

Question 12

The optimal number of units to produce is best expressed when:

Accepted Answer

A) ​marginal benefit exceeds marginal cost 
B) ​marginal cost exceeds marginal benefit 
C) ​marginal benefit and marginal cost are close to equal 
D) ​both a and c 
A) ​marginal benefit exceeds marginal cost 
B) ​marginal cost exceeds marginal benefit 
C) ​marginal benefit and marginal cost are close to equal 
D) ​both a and c

Question 13

Firms need to know the shape of a demand curve to use marginal analysis.

Accepted Answer

A) True 
 B)False

Question 14

Most business people calculate marginal cost and marginal revenue to decide how much to produce.

Accepted Answer

A) True 
 B)False

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

Marginal profit is the additional profit that accrues to the firm when the output rises by one unit.

Net benefit is equal to total benefit minus marginal cost.

Why assume that firms maximize profit, when it is easy to find companies that pursue other goals such as saving rain forests (Ben and Jerry's) and sponsoring Mister Rogers (Sears)?

The difference between economic profit and accountant's definition of profit is that an economist's total cost counts the ____ of inputs.

If a profit-maximizing firm's fixed cost of producing widgets falls,

Economists and accountants have very different definitions of profit.

Many large universities rent out parts of their campuses to conference groups during the summer because such groups cause little damage, require little staff attention, and bring in large amounts of income.A university's decision to rent its campus to a conference group is most clearly based on

If marginal profit is zero, then average profit is at a maximum.

Regarding the relationship between marginal profit and average profit, which of the following statements is NOT true?

The average revenue curve can also be described as the demand curve.

The optimal number of units to produce is best expressed when:

Firms need to know the shape of a demand curve to use marginal analysis.

Most business people calculate marginal cost and marginal revenue to decide how much to produce.

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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