Exam 8: How Firms Make Decisions: Profit Maximization

Hannah's Harmonicas sells 1,000 harmonicas each month at a price of $10.00 each.(She could sell as many as she wishes at that price. )If the marginal cost of producing an additional harmonica is $9.60,then

-Henry decides to quit his job,take his $60,000 in savings,and open a dry cleaning store.Figure 8-1 shows the revenues and expenditures for his first year of operation.Which of the following items would be included in the calculation of the shop's economic profit and not included in the accounting profit?

Using a TR-TC graph,a firm maximizes profit by producing the output level where the greatest

If a firm enjoys a revenue of $500 from two units of output and $600 from three units of output,then its marginal revenue must be rising.

-In Figure 8-5,which of the five output levels corresponds to the highest level of profit?

If the demand curve facing a firm shifts outward,then

In the short run,if a firm's total variable cost curve lies above its total revenue curve at all possible output levels,the firm's minimum short-run loss

When a firm incurs losses in the short run,the most important consideration in determining whether to continue producing is whether

If average fixed cost exceeds average variable cost,a firm should shut down in the short run.

Assume that a firm is able to cover its variable costs if it operates in the short run.If marginal cost equals $0 for all output levels,then the firm's profit-maximizing output level occurs where

-In Figure 8-5,which of the five output levels corresponds to the highest level of total revenue?

If a firm's total cost rises as output rises,then

All of the following,except one,are included in the profit earned by a firm's owners.Which is the exception?

-To maximize profits or minimize losses in the short run,the firm in Figure 8-10 should produce an output of

If a firm has an accounting profit of $2,350,000 and implicit costs totaling $150,000,then its economic profit equals

The demand curve facing a firm

Marginal revenue is

A profit-maximizing firm will never increase production if doing so causes total revenue to decrease.

Myron worked at a factory where he earned $20,000 per year.One day,he quit his job and opened a bumper sticker business.After one year,his business earned $60,000 in sales revenue and he incurred $30,000 in direct business expenses.If he received no salary from the new business,what is his economic profit?

-What can be said about the firm shown in Figure 8-2?