Question 1

A firm's fixed cost

Accepted Answer

A) does not vary with output. 
B) does not change between the short run and the long run. 
C) is generally a higher percentage of its total cost at high output quantities than at low output quantities. 
D) All of the above are true. 
A) does not vary with output. 
B) does not change between the short run and the long run. 
C) is generally a higher percentage of its total cost at high output quantities than at low output quantities. 
D) All of the above are true.

Question 2

Total profit

Accepted Answer

A) is the difference between sales revenue and costs. 
B) maximization is always the goal of every firm. 
C) is always defined the same by both economists and accountants. 
D) is maximized when sales are maximized. 
A) is the difference between sales revenue and costs. 
B) maximization is always the goal of every firm. 
C) is always defined the same by both economists and accountants. 
D) is maximized when sales are maximized.

Question 3

A firm is generally more interested in marginal profits than in total profits.

Accepted Answer

A) True 
 B)False

Question 4

The phone network says it loses money on local calls, because the $20 average monthly bill does not cover its average cost of $30.It estimates that $18 of costs are directly related to local service, with $12 the share from overall expenses (overhead).Why would the phone network be willing to operate if it is losing money?

Accepted Answer

The phone company would save $18 in cost

Question 5

A separate average revenue curve is not required when you have the demand curve for a firm.Explain.

Accepted Answer

Demand curve itself is the average reven

Question 6

The total cost of producing one unit of output is $200; two units cost $300, three units $450, and four units $800.Fixed cost is $50.Draw the associated total cost, average cost, and marginal cost curves, placing total cost on one graph and marginal and average cost on a second graph.

Accepted Answer

The answer of The total cost of producing one unit...

Question 7

Which of the following is true if the opportunity cost of producing a particular good is less than its accounting profit?

Accepted Answer

A) Economic profit is zero. 
B) Economic profit is negative. 
C) Economic profit is positive. 
D) Economic profit cannot be determined. 
A) Economic profit is zero. 
B) Economic profit is negative. 
C) Economic profit is positive. 
D) Economic profit cannot be determined.

Question 8

In the case study discussed in the chapter, the electronics firm was losing money by selling its calculators at a price that was below average cost.

Accepted Answer

A) True 
 B)False

Question 9

What rule(s) should a firm follow in deciding optimum output for profit maximization?

Accepted Answer

The firm should expand its output as lon

Question 10

A company draws its total cost curve and total revenue curve on the same graph.If the firm wishes to maximize profits, it will select the output at which the

Accepted Answer

A) vertical distance between the two curves is greatest. 
B) total cost curve cuts the total revenue curve. 
C) horizontal distance between the two curves is greatest. 
D) slope of the total revenue curve is greatest. 
A) vertical distance between the two curves is greatest. 
B) total cost curve cuts the total revenue curve. 
C) horizontal distance between the two curves is greatest. 
D) slope of the total revenue curve is greatest.

Question 11

A firm's total profit is the difference between its sales and what it pays out in costs.

Accepted Answer

A) True 
 B)False

Question 12

Marginal cost curves and average cost curves are both purely upward sloping.

Accepted Answer

A) True 
 B)False

Question 13

Figure 8-3
  
-Figure 8-3 shows a firm's total profit function.At an output of 40, the firm's total profit equals ____.

Accepted Answer

A) 10 
B) 40 
C) 200 
D) 400 
A) 10 
B) 40 
C) 200 
D) 400

Question 14

Accounting profit is usually smaller than economic profit.

Accepted Answer

A) True 
 B)False

Question 15

A firm can choose a quantity of output, and the price is then determined by

Accepted Answer

A) the government. 
B) the supply schedule. 
C) consumers' demand. 
D) the average cost. 
A) the government. 
B) the supply schedule. 
C) consumers' demand. 
D) the average cost.

Question 16

Explain whether a firm's decisions are optimal if economic profit is (a) positive, (b) zero, or (c) negative.

Accepted Answer

If economic profit is positive, then the

Question 17

"Satisficing" rather than "maximizing" primarily emerges under conditions where

Accepted Answer

A) information is costly. 
B) management lacks ambition. 
C) profit maximization is rejected on moral grounds. 
D) risk is minimal. 
A) information is costly. 
B) management lacks ambition. 
C) profit maximization is rejected on moral grounds. 
D) risk is minimal.

Question 18

If marginal revenue and marginal cost are not equal, profit can be maximized by

Accepted Answer

A) increasing output if MR > MC. 
B) decreasing output if MC > MR. 
C) moving to the output where the slopes of TR and TC are equal. 
D) All of the above are correct. 
A) increasing output if MR > MC. 
B) decreasing output if MC > MR. 
C) moving to the output where the slopes of TR and TC are equal. 
D) All of the above are correct.

Question 19

When a firm's fixed cost rises, its total profit curve shifts

Accepted Answer

A) up at every output level. 
B) down at every output level. 
C) left at every profit level. 
D) right at every profit level. 
A) up at every output level. 
B) down at every output level. 
C) left at every profit level. 
D) right at every profit level.

Question 20

A firm that is earning zero economic profit should go out of business.

Accepted Answer

A) True 
 B)False

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

A firm's fixed cost

Total profit

A firm is generally more interested in marginal profits than in total profits.

A separate average revenue curve is not required when you have the demand curve for a firm.Explain.

The total cost of producing one unit of output is $200; two units cost $300, three units $450, and four units $800.Fixed cost is $50.Draw the associated total cost, average cost, and marginal cost curves, placing total cost on one graph and marginal and average cost on a second graph.

Which of the following is true if the opportunity cost of producing a particular good is less than its accounting profit?

In the case study discussed in the chapter, the electronics firm was losing money by selling its calculators at a price that was below average cost.

What rule(s) should a firm follow in deciding optimum output for profit maximization?

A company draws its total cost curve and total revenue curve on the same graph.If the firm wishes to maximize profits, it will select the output at which the

A firm's total profit is the difference between its sales and what it pays out in costs.

Marginal cost curves and average cost curves are both purely upward sloping.

Figure 8-3 -Figure 8-3 shows a firm's total profit function.At an output of 40, the firm's total profit equals ____.

Accounting profit is usually smaller than economic profit.

A firm can choose a quantity of output, and the price is then determined by

Explain whether a firm's decisions are optimal if economic profit is (a) positive, (b) zero, or (c) negative.

"Satisficing" rather than "maximizing" primarily emerges under conditions where

If marginal revenue and marginal cost are not equal, profit can be maximized by

When a firm's fixed cost rises, its total profit curve shifts

A firm that is earning zero economic profit should go out of business.

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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