Question 1

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

Accepted Answer

The answer of 
-Consider the firm in Figure 8-10.The marginal...

Question 2

Economic analysis assumes that,for each output level,the firm

Accepted Answer

Economic analysis assumes that firms seek to minimize their costs while producing a particular level of output. Therefore, the firm produces at the point where the marginal cost equals the marginal revenue, which is also where the firm's average total cost is at its lowest. This is known as the profit-maximizing output level for the firm.

Question 3

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

Accepted Answer

The marginal revenue is the change in total revenue from selling one more unit. If the third unit increases total revenue by $60, then the marginal revenue is $60.

Question 4

-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

Marginal revenue is the change in total revenue from selling one more unit. If selling 400 reproductions results in a decrease in total revenue by $1,000, then the marginal revenue is -$1,000.

Question 5

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

Accepted Answer

The answer of 
-To maximize profits or minimize losses in...

Question 6

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

Accepted Answer

The additional revenue received by a firm from selling one more unit of output is known as marginal revenue. Therefore, the correct choice is E - marginal revenue.

Question 7

-Consider the firm in Figure 8-10.The marginal revenue from selling the fifth unit of output is

Accepted Answer

The answer of 
-Consider the firm in Figure 8-10.The marginal...

Question 8

If marginal cost exceeds marginal revenue,

Accepted Answer

If marginal cost exceeds marginal revenue, then the cost of producing an additional unit is greater than the revenue gained from selling that unit. This means that the firm is losing money on each unit produced and sold, and therefore increasing output will only result in further losses. As a result, the firm should reduce output in order to increase profits.

Question 9

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

Accepted Answer

Since the price per harmonica ($10.00) is greater than the marginal cost of producing an additional harmonica ($9.60), Hannah will make an additional profit of $0.40 for each harmonica produced and sold. Therefore, producing additional harmonicas will increase her profits.

Question 10

When a firm faces a downward-sloping demand curve,marginal revenue

Accepted Answer

When a firm faces a downward-sloping demand curve, the only way to sell more output is to lower the price of the goods. Therefore, the marginal revenue generated from an additional unit of output will always be less than the price of the good.

Question 11

Marginal revenue is

Accepted Answer

Marginal revenue is defined as the change in total revenue that results from selling one additional unit of output, which is calculated by dividing the change in total revenue by the change in total output.

Question 12

-If the firm in Figure 8-10 sells five units of output,then the price must equal

Accepted Answer

The answer of 
-If the firm in Figure 8-10 sells...

Question 13

Marginal revenue is defined as the

Accepted Answer

Marginal revenue is calculated by determining the change in total revenue resulting from a one-unit change in output quantity. Therefore, it is expressed as the change in total revenue divided by the change in output quantity.

Question 14

-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

The artist must lower the price on all reproductions in order to sell a larger quantity, which causes marginal revenue to fall as output rises.

Question 15

If a firm faces a downward-sloping demand curve,its marginal revenue is

Accepted Answer

When a firm faces a downward-sloping demand curve, it can only increase its sales by lowering the price. Therefore, the marginal revenue (the additional revenue generated by selling one more unit) will always be less than the price. In other words, the firm has to lower the price to sell one more unit, which means that the additional revenue generated by that sale will be less than the original price. Thus, the correct answer is (C) less than price.

Question 16

If a firm faces a horizontal demand curve,marginal revenue

Accepted Answer

A horizontal demand curve implies that the firm can sell any quantity of output at the same price. Therefore, the additional revenue earned from selling one more unit of output (marginal revenue) will be the same as the price of the product. In other words, marginal revenue will not depend on the quantity of output produced, and it will remain constant.

Question 17

According to the marginal approach to profit maximization,firms should increase output as long as total revenue is rising.

Accepted Answer

The marginal approach to profit maximization states that firms should increase output as long as marginal revenue exceeds marginal cost, not just when total revenue is rising.

Question 18

If total revenue falls as more output is produced,

Accepted Answer

If total revenue falls as more output is produced, it means that each additional unit sold is bringing in less revenue than the previous unit. Therefore, marginal revenue (the additional revenue generated by each additional unit sold) must be negative.

Question 19

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

Accepted Answer

The answer of 
-In Figure 8-8,the marginal revenue from adding...

Question 20

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

Accepted Answer

When a firm produces where MR = MC, it maximizes its profit, meaning TR - TC is maximized if there is a profit.

Quiz 8: How Firms Make Decisions: Profit Maximization