Economics exam 2 (chapters 5-8)

question

If indifference curves and budget lines are used to analyze consumer choice, an inferior good will

answer

be easily identified because the quantity purchased will fall as income rises.

question

A budget line is a straight line designed to show

answer

all combinations of two goods that can be purchased with a given income.

question

As a general rule, consumers have

answer

limited income.
unlimited desires for goods.
many choices of goods facing them.

question

The optimal combination of goods for a consumer to purchase is shown by

answer

a point of tangency between the budget line and the indifference curve.

question

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

answer

True

question

Which of the following statements is correct?

answer

If the price of a good falls, the consumer will purchase more of the good in order to maximize total utility.

question

An inferior good is a good whose quantity demanded

answer

rises when the consumer's real income falls.

question

An increase in a family's income will cause its budget line to

answer

move away from the origin.

question

The budget line represents a consumer's preferences for a commodity.

answer

false

question

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

answer

true

question

If total utility declines as an additional unit of a commodity is purchased,

answer

marginal utility is negative.

question

The optimal combination of goods for a consumer to purchase is shown by

answer

a point of tangency between the budget line and the indifference curve.

question

If indifference curves and budget lines are used to analyze consumer choice, an inferior good will

answer

be easily identified because the quantity purchased will fall as income rises.

question

An inferior good is a good whose quantity demanded

answer

rises when the consumer's real income falls.

question

The theory of consumer choice is based on the hypothesis that each consumer wants to

answer

maximize her total utility.

question

A consumer possesses five pounds of bananas and values their total utility at $2.14. If one additional pound is acquired and marginal utility is 11 cents, total utility will

answer

rise to $2.25

question

Which of the following observations is not true of a budget line?

answer

It helps examine the consumer's preferences.

question

As a general rule, consumers have

answer

limited income.
unlimited desires for goods.
many choices of goods facing them.

question

For a ____, if incomes rise and prices do not change, quantity demanded will increase.

answer

normal good

question

The budget line facing a household includes information on

answer

prices of two goods and household income.

question

The optimal combination of goods for a consumer to purchase is shown by

answer

a point of tangency between the budget line and the indifference curve.

question

Which of the following observations is not true of a budget line?

answer

It helps examine the consumer's preferences.

question

The market demand curve

answer

shows how the total quantity demanded of some good changes as price changes, other things held constant.

question

Marginal utility can fall even as total utility from the consumption of a good is rising.

answer

True

question

The budget line represents a consumer's preferences for a commodity.

answer

False

question

In Poland's free market, Felix Siemienas is making a fortune in cold cuts. Prices are much higher than formerly. Siemienas says, "Yes, my prices are high. If nobody buys, I bring my prices down. That is the market rule." This "rule" best describes

answer

the law of demand

question

If total utility declines as an additional unit of a commodity is purchased

answer

marginal utility is negative

question

Total utility increases if one more unit of a product is purchased and marginal utility is positive.

answer

True

question

The budget line represents a consumer's preferences for a commodity.

answer

false

question

The real cost of a decision is the opportunity cost measured in the commodities forgone.

answer

true

question

Which of the following statements is correct?

answer

If the price of a good falls, the consumer will purchase more of the good in order to maximize total utility.

question

If the marginal utility to Juan of sleeping an extra hour (from 8 a.m. to 9 a.m.) is negative,

answer

Juan is better off getting up at 8 a.m.

question

Which of the following observations is not true of a budget line?

answer

It helps examine the consumer's preferences.

question

The difference between slope and elasticity is that slope measures absolute change and elasticity measures percentage change.

answer

true

question

If the price of potatoes is reduced, consumers likely:

answer

roughly the same quantity of potatoes

question

Buyers' expenditures and sellers' revenues are always identical.

answer

true

question

Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish is

answer

positive

question

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

answer

false

question

A demand curve is described as perfectly elastic if

answer

any quantity can be sold at a given price.

question

A demand curve to remain unit elastic along its entire length should

answer

never touch either the X or the Y axis.

question

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50. The new supply curve will ____ the old supply curve.

answer

have the same slope and be more elastic at every price than

question

Total expenditure equals price times elasticity.

answer

false

question

If demand is elastic, an increase in price will decrease total revenue.

answer

true

question

When the price of penicillin tablets increases by $5 per dozen, the drug company's revenue increases by $6 million. Its elasticity of demand (in absolute terms) must be

answer

less than one

question

If demand is unit elastic, revenue

answer

remains constant as price rises or falls.

question

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

answer

true

question

Total expenditure equals price times quantity.

answer

true

question

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the dollar value of her sales remained constant, that indicates

answer

the quantity of books sold increased 20 percent

question

When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent. This indicates that

answer

the demand curve was vertical

question

Buyers' expenditures and sellers' revenues are always identical.

answer

true

question

John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected. This is because the elasticity for bait is

answer

unit elastic

question

A demand curve is described as perfectly inelastic if

answer

the same quantity is purchased regardless of price.

question

The relationship between a change in consumer income and a resulting change in demand for a good is

answer

income elasticity of demand.

question

The slope of the demand curve conveys all the useful information about elasticity.

answer

false

question

Demand elasticity equals quantity times price.

answer

false

question

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the dollar value of her sales remained constant, that indicates

answer

the quantity of books sold increased 20 percent.

question

If the price of potatoes is reduced, consumers likely

answer

roughly the same quantity of potatoes

question

A price cut will increase the revenue a firm receives if the demand for its product is

answer

elastic

question

Along a perfectly elastic demand curve,

answer

the slope is always zero.

question

A perfectly elastic demand curve for a firm

answer

indicates that any increase in price will eliminate all purchases of its product.

question

A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.

answer

false

question

The price elasticity of new automobile purchases is about 1.2. This implies that an increase of $1,000 on a $10,000 automobile will

answer

reduce the number of autos sold by approximately 12 percent.

question

The elasticity of a demand curve at any point can be ascertained by its steepness.

answer

false

question

Production technology determines the relationship of total cost to outputs.

answer

true

question

The average fixed cost curve increases as output increases.

answer

false

question

The "law" of diminishing returns

answer

is based on regular observations of input-output relationships over the last two centuries.

question

If a firm has increasing returns to scale at all levels of output, the

answer

slope of its long-run average cost curve is always negative.

question

If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating

answer

short of an optimal input point.

question

The major incentive for cost minimization is the

answer

discipline imposed by the market system.

question

If a firm is using optimal input proportions, it is minimizing its costs.

answer

true

question

In which case will the transition from short run to long run involve the shortest chronological time?

answer

a service that provides temporary secretaries to companies

question

Which of the following is correct?

answer

AC = AFC + AVC

question

Average physical product measures the increase in total output that results from a one-unit increase in an input.

answer

false

question

Economies of scale is another term for

answer

increasing returns to scale.

question

At a given level of wheat output, one more unit of labor would produce 10 extra bushels, and one more unit of seed would produce 30 extra bushels. A unit of labor costs $6, and a unit of seed costs $12. The farmer should

answer

buy more seed and less labor.

question

The firm can calculate all points on its total cost curve if it knows

answer

the prices of inputs and its production function.

question

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster. For the roller coaster operator, electricity is

answer

a variable cost.

question

Which of the following indicates an input is being overused relative to the optimal level?

answer

MRP < P of input.

question

The rule for the optimal use of any input says that

answer

when MRP is greater than price, it pays to expand resource use.

question

The major incentive for cost minimization is the

answer

discipline imposed by the market system.

question

If a firm is using optimal input proportions, it is minimizing its costs.

answer

true

question

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

answer

MRP/$ of additional labor becomes equal to MRP/$ of additional tools.

question

Which of the following is a variable cost for an airline?

answer

jet fuel

question

When economies of scale are present,

answer

costs per unit decline as output expands

question

When economies of scale exist,

answer

production costs per unit decline as output expands.

question

Which of the following will not lead to increase in the marginal revenue product?

answer

MPP remains the same and price of the product falls.

question

A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a(n)

answer

historical cost curve

question

Which of the following statements is equivalent to the law of diminishing marginal returns?

answer

Too many cooks spoil the broth.

question

Firms should use a resource up to a point where MRP = P.

answer

true

question

Economies of scale is another term for

answer

increasing returns to scale.

question

In the short run the firm has at least one fixed input.

answer

true

question

Production technology determines the relationship of total cost to outputs.

answer

true

question

Price and quantity decisions made by a company have vital influences on

answer

the firm's labor requirements.
consumer response to the product.
future success of the company.

question

If a firm's marginal profit is negative, it should reduce its output level.

answer

true

question

The typical total profit graphical presentation is shown as

answer

a hill or mound

question

Herbert Simon has concluded that decision making in industry is often best described as

answer

satisficing

question

If total profit is at a maximum, then average profit is zero

answer

false

question

Price and output decisions are two aspects of the same choice.

answer

true

question

Marginal analysis is useful in economics, but not in other areas of life.

answer

false

question

Total revenue

answer

can be calculated directly from the demand curve.
can be calculated directly from the average revenue curve.
is found by multiplying price times quantity.

question

If marginal cost is rising, then average cost must be rising.

answer

false

question

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

answer

false

question

If a firm's marginal profit is negative, it should reduce its output level.

answer

true

question

If marginal cost is less than average cost, average cost must fall when more units are produced.

answer

true

question

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

answer

false

question

At a profit-maximizing output level,

answer

marginal revenue minus marginal cost equals zero.
marginal profit equals zero.
the slope of the total profit curve is zero.

question

Total profit is maximized where

answer

MR = MC.
marginal profit is zero.
the slope of the marginal profit curve is zero.

question

Average cost is the cost of producing the next unit.

answer

false

question

Price and output decisions are two aspects of the same choice.

answer

true

question

Accounting profit is usually smaller than economic profit.

answer

false

question

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

answer

True

question

Economic profit of a decision in question equals

answer

accounting profit of the decision in question − accounting profit of the best available alternative.

question

Herbert Simon has concluded that decision making in industry is often best described as

answer

satisficing

question

Price and quantity decisions made by a company have vital influences on

answer

the firm's labor requirements.
consumer response to the product.
future success of the company.

question

Given total cost and the quantity of output, marginal cost and average cost can be determined.

answer

True

question

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

answer

false

question

Price and output decisions are two aspects of the same choice.

answer

True

question

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

answer

false

question

Joe and Ed go to a diner that sells hamburgers for $5 and hot dogs for $3. They agree to split the lunch bill evenly. Ed chooses a hot dog. The marginal cost to Joe then of ordering a hamburger instead of a hot dog is

answer

$2.50

question

Economists and accountants use the same definition of profit.

answer

false

question

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

answer

consumers' demand.

question

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

answer

true

question

If a firm's marginal profit is negative, it should reduce its output level.

answer

True

question

answer

$2.50.

question

Economic profit of a decision in question equals

answer

accounting profit of the decision in question − accounting profit of the best available alternative.

question

If the marginal profit of the next unit is negative, the firm should produce more output in order to generate greater profit.

answer

false

question

The demand curve for a firm's product is also the curve showing

answer

average revenue.

question

Decision making that seeks only solutions that are acceptable is called

answer

satisficing

question

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

answer

false

question

Marginal, average, and total figures are bound together. If any two are known, the third can be calculated.

answer

true

question

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

answer

false

question

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

answer

false

question

A firm that sells at a price below average cost is losing money.

answer

True

question

Economic profit of a decision in question equals

answer

accounting profit of the decision in question − accounting profit of the best available alternative.

question

Decision making that seeks only solutions that are acceptable is called

answer

satisficing.

question

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

answer

false

question

Economists assume that business firms attempt to maximize their profits.

answer

true

question

Price and output decisions are two aspects of the same choice.

answer

true

question

At a profit-maximizing output level,

answer

marginal revenue minus marginal cost equals zero.
marginal profit equals zero.
the slope of the total profit curve is zero.

question

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

answer

true

1 of 140

question

If indifference curves and budget lines are used to analyze consumer choice, an inferior good will

answer

be easily identified because the quantity purchased will fall as income rises.

question

A budget line is a straight line designed to show

answer

all combinations of two goods that can be purchased with a given income.

question

As a general rule, consumers have

answer

limited income.
unlimited desires for goods.
many choices of goods facing them.

question

The optimal combination of goods for a consumer to purchase is shown by

answer

a point of tangency between the budget line and the indifference curve.

question

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

answer

True

question

Which of the following statements is correct?

answer

If the price of a good falls, the consumer will purchase more of the good in order to maximize total utility.

question

An inferior good is a good whose quantity demanded

answer

rises when the consumer's real income falls.

question

An increase in a family's income will cause its budget line to

answer

move away from the origin.

question

The budget line represents a consumer's preferences for a commodity.

answer

false

question

The marginal rate of substitution represents the maximum amount of one commodity a consumer is willing to give up in exchange for one more unit of another commodity.

answer

true

question

If total utility declines as an additional unit of a commodity is purchased,

answer

marginal utility is negative.

question

The optimal combination of goods for a consumer to purchase is shown by

answer

a point of tangency between the budget line and the indifference curve.

question

If indifference curves and budget lines are used to analyze consumer choice, an inferior good will

answer

be easily identified because the quantity purchased will fall as income rises.

question

An inferior good is a good whose quantity demanded

answer

rises when the consumer's real income falls.

question

The theory of consumer choice is based on the hypothesis that each consumer wants to

answer

maximize her total utility.

question

A consumer possesses five pounds of bananas and values their total utility at $2.14. If one additional pound is acquired and marginal utility is 11 cents, total utility will

answer

rise to $2.25

question

Which of the following observations is not true of a budget line?

answer

It helps examine the consumer's preferences.

question

As a general rule, consumers have

answer

limited income.
unlimited desires for goods.
many choices of goods facing them.

question

For a ____, if incomes rise and prices do not change, quantity demanded will increase.

answer

normal good

question

The budget line facing a household includes information on

answer

prices of two goods and household income.

question

The optimal combination of goods for a consumer to purchase is shown by

answer

a point of tangency between the budget line and the indifference curve.

question

Which of the following observations is not true of a budget line?

answer

It helps examine the consumer's preferences.

question

The market demand curve

answer

shows how the total quantity demanded of some good changes as price changes, other things held constant.

question

Marginal utility can fall even as total utility from the consumption of a good is rising.

answer

True

question

The budget line represents a consumer's preferences for a commodity.

answer

False

question

answer

the law of demand

question

If total utility declines as an additional unit of a commodity is purchased

answer

marginal utility is negative

question

Total utility increases if one more unit of a product is purchased and marginal utility is positive.

answer

True

question

The budget line represents a consumer's preferences for a commodity.

answer

false

question

The real cost of a decision is the opportunity cost measured in the commodities forgone.

answer

true

question

Which of the following statements is correct?

answer

If the price of a good falls, the consumer will purchase more of the good in order to maximize total utility.

question

If the marginal utility to Juan of sleeping an extra hour (from 8 a.m. to 9 a.m.) is negative,

answer

Juan is better off getting up at 8 a.m.

question

Which of the following observations is not true of a budget line?

answer

It helps examine the consumer's preferences.

question

The difference between slope and elasticity is that slope measures absolute change and elasticity measures percentage change.

answer

true

question

If the price of potatoes is reduced, consumers likely:

answer

roughly the same quantity of potatoes

question

Buyers' expenditures and sellers' revenues are always identical.

answer

true

question

Chicken and fish are substitutes. Therefore, the cross elasticity of demand between chicken and fish is

answer

positive

question

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

answer

false

question

A demand curve is described as perfectly elastic if

answer

any quantity can be sold at a given price.

question

A demand curve to remain unit elastic along its entire length should

answer

never touch either the X or the Y axis.

question

The emigration of some of Whoville's workers reduces the quantity of thingamabobs supplied at every price by 50. The new supply curve will ____ the old supply curve.

answer

have the same slope and be more elastic at every price than

question

Total expenditure equals price times elasticity.

answer

false

question

If demand is elastic, an increase in price will decrease total revenue.

answer

true

question

When the price of penicillin tablets increases by $5 per dozen, the drug company's revenue increases by $6 million. Its elasticity of demand (in absolute terms) must be

answer

less than one

question

If demand is unit elastic, revenue

answer

remains constant as price rises or falls.

question

The market demand curve shows how the quantity demanded of a product, during a specified time period, changes as the price of that product changes.

answer

true

question

Total expenditure equals price times quantity.

answer

true

question

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the dollar value of her sales remained constant, that indicates

answer

the quantity of books sold increased 20 percent

question

When Johanna cut prices in her jewelry store by 20 percent, the dollar value of her sales fell by 20 percent. This indicates that

answer

the demand curve was vertical

question

Buyers' expenditures and sellers' revenues are always identical.

answer

true

question

John's Bait Shop was surprised to learn that when it raised prices by 10 percent, total revenue was unaffected. This is because the elasticity for bait is

answer

unit elastic

question

A demand curve is described as perfectly inelastic if

answer

the same quantity is purchased regardless of price.

question

The relationship between a change in consumer income and a resulting change in demand for a good is

answer

income elasticity of demand.

question

The slope of the demand curve conveys all the useful information about elasticity.

answer

false

question

Demand elasticity equals quantity times price.

answer

false

question

In an attempt to raise sales, Hannah cut prices in her bookstore by 20 percent. If the dollar value of her sales remained constant, that indicates

answer

the quantity of books sold increased 20 percent.

question

If the price of potatoes is reduced, consumers likely

answer

roughly the same quantity of potatoes

question

A price cut will increase the revenue a firm receives if the demand for its product is

answer

elastic

question

Along a perfectly elastic demand curve,

answer

the slope is always zero.

question

A perfectly elastic demand curve for a firm

answer

indicates that any increase in price will eliminate all purchases of its product.

question

A demand curve with an elasticity of 1.0 is said to be an elastic demand curve.

answer

false

question

The price elasticity of new automobile purchases is about 1.2. This implies that an increase of $1,000 on a $10,000 automobile will

answer

reduce the number of autos sold by approximately 12 percent.

question

The elasticity of a demand curve at any point can be ascertained by its steepness.

answer

false

question

Production technology determines the relationship of total cost to outputs.

answer

true

question

The average fixed cost curve increases as output increases.

answer

false

question

The "law" of diminishing returns

answer

is based on regular observations of input-output relationships over the last two centuries.

question

If a firm has increasing returns to scale at all levels of output, the

answer

slope of its long-run average cost curve is always negative.

question

If the firm's marginal physical product is 8, and its handicrafts sell for $70, at a labor cost of $150, the firm is operating

answer

short of an optimal input point.

question

The major incentive for cost minimization is the

answer

discipline imposed by the market system.

question

If a firm is using optimal input proportions, it is minimizing its costs.

answer

true

question

In which case will the transition from short run to long run involve the shortest chronological time?

answer

a service that provides temporary secretaries to companies

question

Which of the following is correct?

answer

AC = AFC + AVC

question

Average physical product measures the increase in total output that results from a one-unit increase in an input.

answer

false

question

Economies of scale is another term for

answer

increasing returns to scale.

question

answer

buy more seed and less labor.

question

The firm can calculate all points on its total cost curve if it knows

answer

the prices of inputs and its production function.

question

A roller coaster operator produces thrill-packed rides using electricity and a roller coaster. For the roller coaster operator, electricity is

answer

a variable cost.

question

Which of the following indicates an input is being overused relative to the optimal level?

answer

MRP < P of input.

question

The rule for the optimal use of any input says that

answer

when MRP is greater than price, it pays to expand resource use.

question

The major incentive for cost minimization is the

answer

discipline imposed by the market system.

question

If a firm is using optimal input proportions, it is minimizing its costs.

answer

true

question

Where should a producer stop devoting more of his spending on labor if initially the MRP of the additional dollar spent on labor is higher than the MRP of the additional unit spent on tools?

answer

MRP/$ of additional labor becomes equal to MRP/$ of additional tools.

question

Which of the following is a variable cost for an airline?

answer

jet fuel

question

When economies of scale are present,

answer

costs per unit decline as output expands

question

When economies of scale exist,

answer

production costs per unit decline as output expands.

question

Which of the following will not lead to increase in the marginal revenue product?

answer

MPP remains the same and price of the product falls.

question

A cost curve drawn with years on the horizontal axis and costs per unit on the vertical axis would be a(n)

answer

historical cost curve

question

Which of the following statements is equivalent to the law of diminishing marginal returns?

answer

Too many cooks spoil the broth.

question

Firms should use a resource up to a point where MRP = P.

answer

true

question

Economies of scale is another term for

answer

increasing returns to scale.

question

In the short run the firm has at least one fixed input.

answer

true

question

Production technology determines the relationship of total cost to outputs.

answer

true

question

Price and quantity decisions made by a company have vital influences on

answer

the firm's labor requirements.
consumer response to the product.
future success of the company.

question

If a firm's marginal profit is negative, it should reduce its output level.

answer

true

question

The typical total profit graphical presentation is shown as

answer

a hill or mound

question

Herbert Simon has concluded that decision making in industry is often best described as

answer

satisficing

question

If total profit is at a maximum, then average profit is zero

answer

false

question

Price and output decisions are two aspects of the same choice.

answer

true

question

Marginal analysis is useful in economics, but not in other areas of life.

answer

false

question

Total revenue

answer

can be calculated directly from the demand curve.
can be calculated directly from the average revenue curve.
is found by multiplying price times quantity.

question

If marginal cost is rising, then average cost must be rising.

answer

false

question

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

answer

false

question

If a firm's marginal profit is negative, it should reduce its output level.

answer

true

question

If marginal cost is less than average cost, average cost must fall when more units are produced.

answer

true

question

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

answer

false

question

At a profit-maximizing output level,

answer

marginal revenue minus marginal cost equals zero.
marginal profit equals zero.
the slope of the total profit curve is zero.

question

Total profit is maximized where

answer

MR = MC.
marginal profit is zero.
the slope of the marginal profit curve is zero.

question

Average cost is the cost of producing the next unit.

answer

false

question

Price and output decisions are two aspects of the same choice.

answer

true

question

Accounting profit is usually smaller than economic profit.

answer

false

question

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

answer

True

question

Economic profit of a decision in question equals

answer

accounting profit of the decision in question − accounting profit of the best available alternative.

question

Herbert Simon has concluded that decision making in industry is often best described as

answer

satisficing

question

Price and quantity decisions made by a company have vital influences on

answer

the firm's labor requirements.
consumer response to the product.
future success of the company.

question

Given total cost and the quantity of output, marginal cost and average cost can be determined.

answer

True

question

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

answer

false

question

Price and output decisions are two aspects of the same choice.

answer

True

question

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

answer

false

question

answer

$2.50

question

Economists and accountants use the same definition of profit.

answer

false

question

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

answer

consumers' demand.

question

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

answer

true

question

If a firm's marginal profit is negative, it should reduce its output level.

answer

True

question

answer

$2.50.

question

Economic profit of a decision in question equals

answer

accounting profit of the decision in question − accounting profit of the best available alternative.

question

If the marginal profit of the next unit is negative, the firm should produce more output in order to generate greater profit.

answer

false

question

The demand curve for a firm's product is also the curve showing

answer

average revenue.

question

Decision making that seeks only solutions that are acceptable is called

answer

satisficing

question

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

answer

false

question

Marginal, average, and total figures are bound together. If any two are known, the third can be calculated.

answer

true

question

When a firm's fixed costs increase it should raise its prices in order to maximize profits.

answer

false

question

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

answer

false

question

A firm that sells at a price below average cost is losing money.

answer

True

question

Economic profit of a decision in question equals

answer

accounting profit of the decision in question − accounting profit of the best available alternative.

question

Decision making that seeks only solutions that are acceptable is called

answer

satisficing.

question

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

answer

false

question

Economists assume that business firms attempt to maximize their profits.

answer

true

question

Price and output decisions are two aspects of the same choice.

answer

true

question

At a profit-maximizing output level,

answer

marginal revenue minus marginal cost equals zero.
marginal profit equals zero.
the slope of the total profit curve is zero.

question

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

answer

true

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