Question 1

If marginal cost exceeds marginal revenue,

Accepted Answer

A) the firm can increase profits by increasing output 
B) the firm will lower profits by increasing output 
C) the firm is maximizing profits 
D) total cost exceeds total revenue 
E) average cost equals average revenue 
A) the firm can increase profits by increasing output 
B) the firm will lower profits by increasing output 
C) the firm is maximizing profits 
D) total cost exceeds total revenue 
E) average cost equals average revenue

Question 2

A firm is indifferent between staying in business and shutting down in the short run when,at the loss-minimizing level of output,

Accepted Answer

A) total revenue equals total cost 
B) average total cost is at its minimum 
C) total revenue exceeds total cost 
D) total revenue equals total variable cost 
E) total variable cost equals total cost 
A) total revenue equals total cost 
B) average total cost is at its minimum 
C) total revenue exceeds total cost 
D) total revenue equals total variable cost 
E) total variable cost equals total cost

Question 3

If a firm shuts down in the short run,then

Accepted Answer

A) total revenue and total cost drop to zero 
B) total revenue drops to zero,but the firm must still pay its fixed cost 
C) total revenue drops to zero,but the firm must still pay some variable cost 
D) total cost drops to zero,but the firm still earns some residual revenues 
E) neither total revenue nor total cost drops to zero 
A) total revenue and total cost drop to zero 
B) total revenue drops to zero,but the firm must still pay its fixed cost 
C) total revenue drops to zero,but the firm must still pay some variable cost 
D) total cost drops to zero,but the firm still earns some residual revenues 
E) neither total revenue nor total cost drops to zero

Question 4

The difference between accounting profit and economic profit relates to

Accepted Answer

A) the manner in which revenues are defined 
B) how total revenue is calculated 
C) the market structure for the firm's industry 
D) the price of the good in the market 
E) the manner in which costs are defined 
A) the manner in which revenues are defined 
B) how total revenue is calculated 
C) the market structure for the firm's industry 
D) the price of the good in the market 
E) the manner in which costs are defined

Question 5

If a firm's short-run total cost curve lies above its total revenue curve at all output levels,the firm should

Accepted Answer

A) always shut down in the short run 
B) always operate in the short run 
C) operate in the short run if the maximum operating loss is less than its total fixed cost 
D) operate in the short run if the minimum operating loss is less than its total fixed cost 
E) operate in the short run if the average operating loss is less than its total fixed cost 
A) always shut down in the short run 
B) always operate in the short run 
C) operate in the short run if the maximum operating loss is less than its total fixed cost 
D) operate in the short run if the minimum operating loss is less than its total fixed cost 
E) operate in the short run if the average operating loss is less than its total fixed cost

Question 6

If a firm shuts down in the short run,

Accepted Answer

A) it exits the industry 
B) losses would equal its variable costs 
C) losses would equal its fixed costs 
D) profits would be zero 
E) losses would equal to zero 
A) it exits the industry 
B) losses would equal its variable costs 
C) losses would equal its fixed costs 
D) profits would be zero 
E) losses would equal to zero

Question 7

The demand curve facing a firm

Accepted Answer

A) indicates the quantity of output that customers will purchase from that firm,at various prices 
B) shows the minimum cost of producing any level of output 
C) is drawn assuming that the firm is operating in the short run 
D) indicates how much output a profit-maximizing firm will produce,at various prices 
E) is downward sloping because consumers have less money to spend,the more output they purchase 
A) indicates the quantity of output that customers will purchase from that firm,at various prices 
B) shows the minimum cost of producing any level of output 
C) is drawn assuming that the firm is operating in the short run 
D) indicates how much output a profit-maximizing firm will produce,at various prices 
E) is downward sloping because consumers have less money to spend,the more output they purchase

Question 8

If a firm chooses to produce output at the point where MR equals MC,

Accepted Answer

A) then TR - TC will be maximized if there is a profit 
B) economic profits will be zero 
C) there will be positive accounting profits 
D) there will be positive economic profits 
E) average cost must equal average revenue 
A) then TR - TC will be maximized if there is a profit 
B) economic profits will be zero 
C) there will be positive accounting profits 
D) there will be positive economic profits 
E) average cost must equal average revenue

Question 9

If the price of gasoline rises at the Exxon gas station at a busy intersection,the Mobil station at the same intersection will experience

Accepted Answer

A) an outward shift of the demand curve it faces 
B) an inward shift of the demand curve it faces 
C) a rightward movement along the same demand curve it faces 
D) a leftward movement along the same demand curve it faces 
E) neither a shift in nor a movement along the demand curve it faces 
A) an outward shift of the demand curve it faces 
B) an inward shift of the demand curve it faces 
C) a rightward movement along the same demand curve it faces 
D) a leftward movement along the same demand curve it faces 
E) neither a shift in nor a movement along the demand curve it faces

Question 10

The two important contributions of entrepreneurs are

Accepted Answer

A) innovation and independent wealth 
B) good management skills and honesty 
C) risk taking and honesty 
D) good management skills and independent wealth 
E) innovation and risk taking 
A) innovation and independent wealth 
B) good management skills and honesty 
C) risk taking and honesty 
D) good management skills and independent wealth 
E) innovation and risk taking

Question 11

Accounting profit is defined as

Accepted Answer

A) total revenue minus opportunity cost 
B) total revenue minus all costs of production 
C) total revenue minus explicit costs 
D) the sum of marginal revenues received from all units produced 
E) the difference between marginal revenue and marginal cost 
A) total revenue minus opportunity cost 
B) total revenue minus all costs of production 
C) total revenue minus explicit costs 
D) the sum of marginal revenues received from all units produced 
E) the difference between marginal revenue and marginal cost

Question 12

-Figure 8-9 shows the demand schedule faced by an artist for reproductions of his paintings.What is the marginal revenue from expanding from selling reproductions to 400?

Accepted Answer

A) $3,000 
B) $1 
C) $0 
D) -$1,000 
E) -$3,000 
A) $3,000 
B) $1 
C) $0 
D) -$1,000 
E) -$3,000

Question 13

-Figure 8-11 indicates the prices at which Lorine's Hair Salon is able to sell various quantities of manicures.If the salon initially provides 4 manicures per day and then increases to 5 manicures per day,the increased sales will generate a marginal revenue equal to

Accepted Answer

A) $7 
B) $11 
C) $48 
D) $55 
E) $65 
A) $7 
B) $11 
C) $48 
D) $55 
E) $65

Question 14

If a firm's managers inappropriately decide to operate where total revenue is maximized,they will continue to increase output

Accepted Answer

A) as long as marginal revenue exceeds marginal cost 
B) as long as marginal cost exceeds marginal revenue 
C) as long as the total revenue curve is above zero 
D) as long as the marginal revenue curve is above the horizontal axis 
E) until the total revenue curve intersects the total cost curve 
A) as long as marginal revenue exceeds marginal cost 
B) as long as marginal cost exceeds marginal revenue 
C) as long as the total revenue curve is above zero 
D) as long as the marginal revenue curve is above the horizontal axis 
E) until the total revenue curve intersects the total cost curve

Question 15

A firm that is suffering a loss should shut down immediately if total revenue (TR)is less than total variable cost (TVC).

Accepted Answer

A) True 
 B)False

Question 16

-Consider the firm in Figure 8-10.The marginal cost of producing the fifth unit of output is

Accepted Answer

A) $300 
B) $1,500 
C) $50 
D) $40 
E) $60 
A) $300 
B) $1,500 
C) $50 
D) $40 
E) $60

Question 17

-In Figure 8-8,the marginal revenue from adding the third unit of output is

Accepted Answer

A) $240 
B) $80 
C) $90 
D) $40 
E) $60 
A) $240 
B) $80 
C) $90 
D) $40 
E) $60

Question 18

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 $980. 
C) If the firm increased output from 2 units to 3 units,total revenue would increase. 
D) If the firm increased output from 6 units to 7 units,total revenue would increase. 
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 $980. 
C) If the firm increased output from 2 units to 3 units,total revenue would increase. 
D) If the firm increased output from 6 units to 7 units,total revenue would increase. 
E) If the firm decreased output from 6 units to 5 units,total revenue would decline.

If marginal cost exceeds marginal revenue,

A firm is indifferent between staying in business and shutting down in the short run when,at the loss-minimizing level of output,

If a firm shuts down in the short run,then

The difference between accounting profit and economic profit relates to

If a firm's short-run total cost curve lies above its total revenue curve at all output levels,the firm should

If a firm shuts down in the short run,

The demand curve facing a firm

If a firm chooses to produce output at the point where MR equals MC,

If the price of gasoline rises at the Exxon gas station at a busy intersection,the Mobil station at the same intersection will experience

The two important contributions of entrepreneurs are

Accounting profit is defined as

-Figure 8-9 shows the demand schedule faced by an artist for reproductions of his paintings.What is the marginal revenue from expanding from selling reproductions to 400?

-Figure 8-11 indicates the prices at which Lorine's Hair Salon is able to sell various quantities of manicures.If the salon initially provides 4 manicures per day and then increases to 5 manicures per day,the increased sales will generate a marginal revenue equal to

If a firm's managers inappropriately decide to operate where total revenue is maximized,they will continue to increase output

A firm that is suffering a loss should shut down immediately if total revenue (TR)is less than total variable cost (TVC).

-Consider the firm in Figure 8-10.The marginal cost of producing the fifth unit of output is

-In Figure 8-8,the marginal revenue from adding the third unit of output is

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

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

If marginal cost exceeds marginal revenue,

A firm is indifferent between staying in business and shutting down in the short run when,at the loss-minimizing level of output,

If a firm shuts down in the short run,then

The difference between accounting profit and economic profit relates to

If a firm's short-run total cost curve lies above its total revenue curve at all output levels,the firm should

If a firm shuts down in the short run,

The demand curve facing a firm

If a firm chooses to produce output at the point where MR equals MC,

If the price of gasoline rises at the Exxon gas station at a busy intersection,the Mobil station at the same intersection will experience

The two important contributions of entrepreneurs are

Accounting profit is defined as

-Figure 8-9 shows the demand schedule faced by an artist for reproductions of his paintings.What is the marginal revenue from expanding from selling reproductions to 400?

-Figure 8-11 indicates the prices at which Lorine's Hair Salon is able to sell various quantities of manicures.If the salon initially provides 4 manicures per day and then increases to 5 manicures per day,the increased sales will generate a marginal revenue equal to

If a firm's managers inappropriately decide to operate where total revenue is maximized,they will continue to increase output

A firm that is suffering a loss should shut down immediately if total revenue (TR)is less than total variable cost (TVC).

-Consider the firm in Figure 8-10.The marginal cost of producing the fifth unit of output is

-In Figure 8-8,the marginal revenue from adding the third unit of output is

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

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