Question 1

-Consider the firm shown in Figure 8-6.If there is an increase in fixed cost,then

Accepted Answer

A) the TR curve will rotate upward 
B) the TR curve will shift to the right 
C) the TR curve will be unaffected 
D) the TC curve will shift downward 
E) profits will rise 
A) the TR curve will rotate upward 
B) the TR curve will shift to the right 
C) the TR curve will be unaffected 
D) the TC curve will shift downward 
E) profits will rise

Question 2

According to the marginal approach to profit maximization,

Accepted Answer

A) firms should equate total revenue and marginal cost when choosing the optimal output level 
B) firms should take any action that increases revenue more than costs 
C) economic profit is zero in the long run 
D) marginal cost declines until it reaches marginal revenue at the profit-maximizing output level 
E) marginal costs eventually diminish as more output is produced 
A) firms should equate total revenue and marginal cost when choosing the optimal output level 
B) firms should take any action that increases revenue more than costs 
C) economic profit is zero in the long run 
D) marginal cost declines until it reaches marginal revenue at the profit-maximizing output level 
E) marginal costs eventually diminish as more output is produced

Question 3

The additional revenue received by a firm from selling one more unit of output is known as

Accepted Answer

A) total revenue 
B) price 
C) average revenue 
D) marginal cost 
E) marginal revenue 
A) total revenue 
B) price 
C) average revenue 
D) marginal cost 
E) marginal revenue

Question 4

If the marginal cost and marginal revenue curves intersect at two different points,then maximum profit occurs at

Accepted Answer

A) the output level where the MC curve crosses the MR curve from below 
B) the output level where the MC curve crosses the MR curve from above 
C) both points 
D) an output level between the two points 
E) an output level beyond the second point 
A) the output level where the MC curve crosses the MR curve from below 
B) the output level where the MC curve crosses the MR curve from above 
C) both points 
D) an output level between the two points 
E) an output level beyond the second point

Question 5

-Assume all of a firm's costs are positive and consider the total revenue curve depicted in Figure 8-7.In order to maximize profit,or minimize loss,the firm

Accepted Answer

A) should produce 100 units of output 
B) should produce 200 units of output 
C) should produce less than 100 units of output 
D) should produce between 100 and 200 units of output 
E) cannot close 
A) should produce 100 units of output 
B) should produce 200 units of output 
C) should produce less than 100 units of output 
D) should produce between 100 and 200 units of output 
E) cannot close

Question 6

A firm will continue to produce if total revenue is greater than total variable cost even if total revenue is less than fixed cost.

Accepted Answer

A) True 
 B)False

Question 7

Innovations that generate profit for a firm's owners include developing

Accepted Answer

A) both c and d 
B) all of the following 
C) markets in new locations 
D) new products 
E) new production processes and distribution methods 
A) both c and d 
B) all of the following 
C) markets in new locations 
D) new products 
E) new production processes and distribution methods

Question 8

-Henry decides to quit his job (earning $50,000 per year),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.If Henry could have earned $3,000 in interest on the money used to open the store,his accounting profit would have been

Accepted Answer

A) -$13,000 
B) -$3,000 
C) $20,000 
D) $40,000 
E) $37,000 
A) -$13,000 
B) -$3,000 
C) $20,000 
D) $40,000 
E) $37,000

Question 9

If a firm is producing the level of output at which the total cost curve intersects the total revenue curve,

Accepted Answer

A) profit is positive 
B) profit is maximized 
C) profit is zero 
D) costs are minimized 
E) average revenue is maximized 
A) profit is positive 
B) profit is maximized 
C) profit is zero 
D) costs are minimized 
E) average revenue is maximized

Question 10

In order to maximize profits,a firm should decrease output whenever total cost exceeds total revenue.

Accepted Answer

A) True 
 B)False

Question 11

-In Figure 8-5,at which of the five output levels is profit equal to zero?

Accepted Answer

A) level A 
B) level B 
C) level C 
D) level D 
E) level E 
A) level A 
B) level B 
C) level C 
D) level D 
E) level E

Question 12

Which of the following determines the maximum price a firm may charge for a particular quantity of output?

Accepted Answer

A) the firm's supply curve 
B) opportunity costs 
C) explicit and implicit costs of production 
D) the minimum point of the average total cost curve 
E) the demand curve facing the firm 
A) the firm's supply curve 
B) opportunity costs 
C) explicit and implicit costs of production 
D) the minimum point of the average total cost curve 
E) the demand curve facing the firm

Question 13

-Figure 8-3 shows the total revenue and total cost for a firm at selected output levels.Which is the profit-maximizing level of output for this firm?

Accepted Answer

A) 100 units 
B) 200 units 
C) 500 units 
D) 300 units 
E) 400 units 
A) 100 units 
B) 200 units 
C) 500 units 
D) 300 units 
E) 400 units

Question 14

Suppose that Carla's Candy Shop finds that at the current level of output,marginal revenue is below marginal cost and average variable cost is below price.If the market price is held constant,Carla's Candy Shop should __________ in order to maximize profits.

Accepted Answer

A) raise output 
B) reduce its price 
C) reduce output 
D) close down 
E) maintain its current output level 
A) raise output 
B) reduce its price 
C) reduce output 
D) close down 
E) maintain its current output level

Question 15

The demand curve facing the firm has been estimated as follows:
 
-
Which of the following statements about the firm's total revenue is correct?

Accepted Answer

A) If the firm sold 3 units of output,it would have revenues totaling $540. 
B) If the firm sold 7 units of output,it would have revenues totaling $560. 
C) If the firm increased output from 2 units to 3 units,total revenue would decline. 
D) If the firm decreased output from 7 units to 6 units,total revenue would decline. 
E) If the firm decreased output from 6 units to 5 units,total revenue would decline. 
A) If the firm sold 3 units of output,it would have revenues totaling $540. 
B) If the firm sold 7 units of output,it would have revenues totaling $560. 
C) If the firm increased output from 2 units to 3 units,total revenue would decline. 
D) If the firm decreased output from 7 units to 6 units,total revenue would decline. 
E) If the firm decreased output from 6 units to 5 units,total revenue would decline.

Question 16

Marginal revenue is defined as the

Accepted Answer

A) total revenue minus total cost 
B) change in total revenue divided by the change in the quantity of output 
C) price minus average total cost 
D) total revenue over the quantity of output 
E) quantity times price 
A) total revenue minus total cost 
B) change in total revenue divided by the change in the quantity of output 
C) price minus average total cost 
D) total revenue over the quantity of output 
E) quantity times price

Question 17

The behavior of firms is best understood by focusing on

Accepted Answer

A) money profit 
B) economic profit 
C) accounting profit 
D) economic profit minus implicit costs 
E) money profit minus explicit costs 
A) money profit 
B) economic profit 
C) accounting profit 
D) economic profit minus implicit costs 
E) money profit minus explicit costs

Question 18

-Figure 8-9 shows the demand schedule faced by an artist for reproductions of one of his paintings.His marginal revenue falls as output rises because

Accepted Answer

A) marginal cost is rising 
B) the artist must lower the price on all reproductions in order to sell a larger quantity 
C) total revenue is increasing at an increasing rate 
D) the price is equal to marginal revenue 
E) the artist works in a perfectly competitive market for art 
A) marginal cost is rising 
B) the artist must lower the price on all reproductions in order to sell a larger quantity 
C) total revenue is increasing at an increasing rate 
D) the price is equal to marginal revenue 
E) the artist works in a perfectly competitive market for art

Question 19

In the short run,profit maximization typically occurs where total revenue is at its maximum.

Accepted Answer

A) True 
 B)False

Question 20

A firm's total cost of production

Accepted Answer

A) always increases as it produces more output 
B) can increase or decrease as it produces more output 
C) increases at a decreasing rate as long as it produces more output 
D) is fixed in the short run,because inputs are fixed in the short run 
E) can be minimized by producing where the firm's demand curve crosses the horizontal axis 
A) always increases as it produces more output 
B) can increase or decrease as it produces more output 
C) increases at a decreasing rate as long as it produces more output 
D) is fixed in the short run,because inputs are fixed in the short run 
E) can be minimized by producing where the firm's demand curve crosses the horizontal axis

-Consider the firm shown in Figure 8-6.If there is an increase in fixed cost,then

According to the marginal approach to profit maximization,

The additional revenue received by a firm from selling one more unit of output is known as

If the marginal cost and marginal revenue curves intersect at two different points,then maximum profit occurs at

-Assume all of a firm's costs are positive and consider the total revenue curve depicted in Figure 8-7.In order to maximize profit,or minimize loss,the firm

A firm will continue to produce if total revenue is greater than total variable cost even if total revenue is less than fixed cost.

Innovations that generate profit for a firm's owners include developing

If a firm is producing the level of output at which the total cost curve intersects the total revenue curve,

In order to maximize profits,a firm should decrease output whenever total cost exceeds total revenue.

-In Figure 8-5,at which of the five output levels is profit equal to zero?

Which of the following determines the maximum price a firm may charge for a particular quantity of output?

-Figure 8-3 shows the total revenue and total cost for a firm at selected output levels.Which is the profit-maximizing level of output for this firm?

Suppose that Carla's Candy Shop finds that at the current level of output,marginal revenue is below marginal cost and average variable cost is below price.If the market price is held constant,Carla's Candy Shop should __________ in order to maximize profits.

The demand curve facing the firm has been estimated as follows: - Which of the following statements about the firm's total revenue is correct?

Marginal revenue is defined as the

The behavior of firms is best understood by focusing on

-Figure 8-9 shows the demand schedule faced by an artist for reproductions of one of his paintings.His marginal revenue falls as output rises because

In the short run,profit maximization typically occurs where total revenue is at its maximum.

A firm's total cost of production

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters

Exam 8: How Firms Make Decisions: Profit Maximization

-Consider the firm shown in Figure 8-6.If there is an increase in fixed cost,then

According to the marginal approach to profit maximization,

The additional revenue received by a firm from selling one more unit of output is known as

If the marginal cost and marginal revenue curves intersect at two different points,then maximum profit occurs at

-Assume all of a firm's costs are positive and consider the total revenue curve depicted in Figure 8-7.In order to maximize profit,or minimize loss,the firm

A firm will continue to produce if total revenue is greater than total variable cost even if total revenue is less than fixed cost.

Innovations that generate profit for a firm's owners include developing

If a firm is producing the level of output at which the total cost curve intersects the total revenue curve,

In order to maximize profits,a firm should decrease output whenever total cost exceeds total revenue.

-In Figure 8-5,at which of the five output levels is profit equal to zero?

Which of the following determines the maximum price a firm may charge for a particular quantity of output?

-Figure 8-3 shows the total revenue and total cost for a firm at selected output levels.Which is the profit-maximizing level of output for this firm?

Suppose that Carla's Candy Shop finds that at the current level of output,marginal revenue is below marginal cost and average variable cost is below price.If the market price is held constant,Carla's Candy Shop should __________ in order to maximize profits.

The demand curve facing the firm has been estimated as follows: - Which of the following statements about the firm's total revenue is correct?

Marginal revenue is defined as the

The behavior of firms is best understood by focusing on

-Figure 8-9 shows the demand schedule faced by an artist for reproductions of one of his paintings.His marginal revenue falls as output rises because

In the short run,profit maximization typically occurs where total revenue is at its maximum.

A firm's total cost of production

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

Perfect Competition

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters