Economics CH 8 Practice Test
If total cost are increasing then A) marginal cost must also be increasing. B) marginal cost must be positive. C) average cost must be greater than marginal cost. D) average cost must be increasing.
b
Marginal cost equals A) total cost divided by total output. B) the change in total cost associated with an additional unit of output. C) the change in average cost. D) the slope of the average cost.
b
Producing where marginal revenue equals marginal cost is the same as producing where A) average cost is minimized B) total profit is maximized C) average cost equals average revenue D)marginal profits is maximized
b
A reduction in fixed cost should lead a firm to increase output T/F
f
As long as average revenue exceeds average cost, a firm is making profits and should increase output
f
Business can decide both the price and quantity of their output. T/F
f
Firms always make optimal decisions. T/F
f
It never pays to sell below average cost
f
The demand curve for a firm's production is also the firm's marginal revenue curve. T/F
f
The marginal revenue is simply the price of the last unit sold. T/F
f
If marginal revenue is greater than marginal cost. then a firm interested in maximizing profits should probably A) reduce output B) expand output C) leave output unchanged
b
Average cost is found by A)dividing total cost by output. B) multiplying marginal cost by output. C) looking at how total cost changes when output changes. D) considering how price changes with quantity along the demand curve.
a
If accounting profits are zero, it is likely that economic profits are A) negative B) also zero C) positive
a
Once a firm has determined the output level that maximizes profits , it can determine profit maximization price from A) the demand curve. B) setting it's usual markup on average cost. C) adding marginal cost to marginal revenue. D) adding marginal cost to average cost.
a
When output is increased by one unit, marginal revenue will typically be A) less than the new lower price. B) equal to the new lower price. C) greater than the new lower price.
a
An economist's definition of profit differs from that of an accountant because. A) the economist is only interested in marginal cost and marginal revenue. B) the economist include the opportunity cost of owners-supplied inputs in total cost. C) accountants cannot maximize. D) economist cannot add or subtract correctly.
b
The logic of demand curves says that business firms choose A) both the level of output and the level of prices. B) the level of output or the level of prices but not both. C) to sell whatever quantity they want at whatever price. D) only those levels of output where marginal cost equals marginal revenue.
b
As long as total revenue is greater than total cost A) marginal profit must be positive B) total profit must be increasing C) total profit will be positive D) marginal revenue will be greater than marginal cost
c
If a firm has chosen an output level that maximizes profits, then at this level A) marginal profits are also maximized. B) average cost is minimized. C) further increases in output will involve negative marginal practices. D) the difference between average revenue and average cost are maximized
c
Marginal profit equal the difference between A) total revenue and total cost B) average revenue and average cost C) marginal revenue and marginal cost D) the demand curve and the marginal cost curve
c
The assumption of profit maximization is A) likely to be true all firms. B) the same as the assumption of satisficing. C) a useful abstraction that gives sharp insights. D) the best description of what firms actually do.
c
To maximize profits, a firm should produce where A) marginal cost is minimized B) average cost is minimized C) marginal revenue equal marginal cost D) marginal revenue ismaximized
c
Total profit is equal to A) average revenue minus average cost.. B) marginal revenue minus marginal cost. C) total revenue minus total cost. D) zero when marginal cost equals marginal revenue.
c
I marginal revenue is less than average cost, a firm A) should reduce output; it loses additional revenue but saves more in cost. B) must be losing money. C) should consider a temporary shutdown. D) can still increase profits in marginal revenue exceeds marginal cost.
d
Marginal profit is A) the difference between total revenue and total cost. B) only positive at the profit-maximizing output level. C) another term for return on an owner's own time and resources. D) the change in profit when output increases by one unit
d
Marginal revenue to a firm is A) the same as the demand curve for firm's output. B) found by dividing price by output. C) found by dividing output by price. D) the change in revenue associated with an additional unit of output.
d
The demand curve is the curve of A) total revenue B) marginal revenue C) variable revenue D) average revenue
d
An economist's measure of profit would typically be smaller than accountant's T/F
t
An output decision will generally not maximize profits unless it corresponds to a zero marginal profit. T/F
t
Marginal profit will be zero when marginal revenue equals marginal cost. T/F
t