Question 1

If a potato farmer increases output and finds that total revenue increased less than total cost, then you know for sure that

Accepted Answer

If total revenue increased less than total cost, the farmer's profit decreased, indicating that increasing output was not beneficial.

Question 2

Economists believe that entrepreneurs, whether they can articulate their behavior or not, always think about ________, which explains their MC = MR profit-maximizing activity.

Accepted Answer

Entrepreneurs focus on the consequences of producing the next unit to ensure that the marginal cost (MC) of producing that unit equals the marginal revenue (MR) gained from selling it, which is a fundamental principle for achieving profit maximization.

Question 3

If the price doesn't change, no matter how much output is produced, the total revenue curve is a(n)

Accepted Answer

Total revenue is calculated as price times quantity. If the price remains constant while output increases, total revenue increases linearly with quantity, resulting in an upward-sloping straight line.

Question 4

Average revenue is another way of describing

Accepted Answer

Average revenue is the revenue earned per unit of output sold, which is essentially the price of the good or service.

Question 5

When price is constant, the average revenue curve is a(n)

Accepted Answer

When price is constant, the average revenue (which is total revenue divided by quantity) remains the same regardless of the quantity sold, resulting in a horizontal line.

Question 6

If the price of parsley is $1, and the price remains unchanged no matter how much parsley is produced, then the AR curve

Accepted Answer

The AR (Average Revenue) curve is a horizontal line when the price remains unchanged regardless of the quantity produced, indicating that the average revenue per unit is constant.

Question 7

When the price curve is a horizontal line, it always coincides with all of the following except

Accepted Answer

When the price curve is a horizontal line, it indicates a constant price regardless of the quantity sold. This means that marginal revenue (MR), average revenue (AR), and total revenue divided by quantity (TR/Q) will all equal the constant price, as will the change in total revenue divided by change in output, since these all reflect aspects of revenue at a constant price per unit. However, total cost (TC) is not necessarily equal to or represented by the price curve, as it depends on the cost structure of the firm, which can vary independently of the price.

Question 8

Which two curves tell you whether or not you've achieved maximum profit?

Accepted Answer

The MR (Marginal Revenue) and MC (Marginal Cost) curves are essential for determining the point of maximum profit. When MR equals MC, it indicates that any additional unit produced will not add to the overall profit, thus identifying the profit-maximizing level of output.

Question 9

-In Exhibit I-8, when the firm produces a quantity of 2, its total revenue is

Accepted Answer

The total revenue is calculated by multiplying the quantity produced by the price per unit. If the firm produces a quantity of 2 and the total revenue is $24, it implies the price per unit is $12.

Question 10

-If you create an MR column for Exhibit I-8, it will be the same as which column?

Accepted Answer

The answer of 
-If you create an MR column for...

Question 11

-In Exhibit I-8, what quantity would you produce to maximize profit?

Accepted Answer

The answer of 
-In Exhibit I-8, what quantity would you...

Question 12

Suppose you're producing designer clothes for Barbie dolls. You're producing 100 units and discover that the MR for the 100th unit is $50 while the MC of the 100th unit is $45. If you're in the short run, it's a signal for you to

Accepted Answer

In the short run, if the marginal revenue (MR) of producing an additional unit is greater than the marginal cost (MC) of producing that unit, it indicates that producing that unit is profitable. Therefore, increasing production beyond the current level (in this case, 100 units) can potentially increase overall profit.

Question 13

If ABC Printing produces 100 calendars, and the MR of the 100th is $5 and the MC is $3, then the firm is

Accepted Answer

When marginal revenue (MR) exceeds marginal cost (MC), it indicates that producing additional units will increase profit. Since the MR of the $100th calendar is $5, which is higher than the MC of $3, ABC Printing could increase its profit by producing more than 100 calendars, indicating it is producing too few calendars.

Question 14

According to the text, Israelis living on a kibbutz in Israel

Accepted Answer

The answer of According to the text, Israelis living on...

Question 15

According to the text, on a kibbutz in Israel

Accepted Answer

The answer of According to the text, on a kibbutz...

Question 16

Consider a firm with the following cost and revenue information: ATC = $20,AVC = $10, and P = MR = $30. If the firm follows the rule to maximize profits, its output level is 3. Therefore MC equals

Accepted Answer

To maximize profits, a firm will produce where marginal cost (MC) equals marginal revenue (MR). Given that P = MR = $30, the MC must also be $30.

Question 17

The entrepreneur will typically have the most difficulty controlling

Accepted Answer

Price is often determined by the market and can be difficult for an entrepreneur to control, especially in competitive industries. Factors such as supply and demand, competition, and consumer preferences heavily influence price, making it challenging for an individual entrepreneur to exert control over it.

Question 18

-In Exhibit I-9, the maximum profit at the price of $8 is

Accepted Answer

The answer of 
-In Exhibit I-9, the maximum profit at...

Question 19

If price equals average total cost, then total revenue

Accepted Answer

When price equals average total cost, the total revenue generated from selling the goods or services is exactly equal to the total cost of producing them, meaning the firm breaks even.

Question 20

If price is greater than average variable cost, then the firm

Accepted Answer

When price is greater than average variable cost, the firm covers its variable costs and contributes to covering its fixed costs. This situation does not guarantee economic profit but allows the firm to operate without incurring additional losses from shutting down. Whether the firm makes an economic profit or loss depends on how much of the fixed costs can be covered by the revenue exceeding the variable costs.

Quiz 9: Maximizing Profit