Question 1

A price-taking firm's variable cost function is C = Q³,where Q is the output per week.It has a sunk fixed cost of $2,000 per week.Its marginal cost is MC = 3Q².What is the profit maximizing output if the price is P = $192?

Accepted Answer

To find the profit maximizing output, we need to set marginal cost equal to price (since a price-taking firm will produce where MC = P in order to maximize profits). 
So, at P = $192, we have: 
MC = 3Q^(1/2) = P = $192 
Solving for Q gives us Q = (192/3)^2 = 4096
Now, we need to check if producing 4096 units will result in a positive profit. 
Total Cost = Fixed Cost + Variable Cost 
Fixed Cost = $2,000 per week 
Variable Cost = C = QS^(1/2)P^(3/2) = 4096*(S^(1/2))*(192^(3/2)) 
Assuming S = 1, we have Variable Cost = $16,777,216 per week. 
So, Total Cost = $2,000 + $16,777,216 = $16,779,216 
Total Revenue = P*Q = $192*4096 = $786,432 
Profit = Total Revenue - Total Cost = $786,432 - $16,779,216 = -$15,992,784 
Since the profit is negative, producing 4096 units will not result in a positive profit. 
To find the profit maximizing output, we need to compare the profits of producing 8 and 10 units. 
For Q = 8: 
Total Cost = $2,000 + (8*(1^(1/2))*(192^(3/2))) = $9,437,184 
Total Revenue = $192*8 = $1,536 
Profit = Total Revenue - Total Cost = $1,536 - $9,437,184 = -$9,435,648 
For Q = 10: 
Total Cost = $2,000 + (10*(1^(1/2))*(192^(3/2))) = $11,796,480 
Total Revenue = $192*10 = $1,920 
Profit = Total Revenue - Total Cost = $1,920 - $11,796,480 = -$11,794,560 
Since the profit is less negative for Q = 8, the profit maximizing output is 8.

Question 2

Suppose you own a store that sells computers.You have determined that the demand function for your computers is D(P)= 900 - 3P.At what price would you sell the computers if you wanted to sell 60 of them?

Accepted Answer

To find the price at which 60 computers would be sold, substitute D(P) = 60 into the demand function and solve for P: 60 = 900 - 3P. Rearranging gives 3P = 840, so P = 280.

Question 3

How much a firm much charge to sell any given quantity of their product is described by a(n)

Accepted Answer

The inverse demand function describes the relationship between the quantity demanded and the price a firm can charge. It shows how much a customer is willing to pay for a given quantity of the product. Therefore, the inverse demand function can be used to determine the optimal price level to maximize revenue for the firm.

Question 4

Given a demand function of D(P)= 500 - 10P,what is it's inverse demand function?

Accepted Answer

The inverse demand function is found by solving the demand function for P. Starting with D(P) = 500 - 10P, we solve for P to get P = (500 - D)/10. Since D is the quantity demanded (Q), we rewrite it as P(Q) = 50 - Q/10.

Question 5

Which of the following is NOT true about marginal revenue?

Accepted Answer

C) is incorrect because the correct formula for marginal revenue (MR) is MR = [R(Q + ∆Q) - R(Q)]/∆Q, which represents the change in revenue from producing one more unit, not R(Q - ∆Q) - R(Q).

Question 6

Suppose you own a store that sells top of the line MP3 players.You have determined that the demand function for your MP3 players is D(P)= 1200 - 4P.At what price would you sell the MP3 players if you wanted to sell 120 of them?

Accepted Answer

To find the price at which 120 MP3 players will be sold, we need to substitute D(P) = 120 in the given demand function and solve for P.

1200 - 4P = 120

4P = 1200 - 120

4P = 1080

P = 1080/4

P = 270

Therefore, we should sell the MP3 players at a price of $270 to sell 120 of them.

Question 7

In which situation may a company NOT want to maximize profit?

Accepted Answer

In this situation, the company may prioritize family loyalty or relationships over maximizing profit.

Question 8

The extra revenue produced by the change in quantity,on a per unit basis,is called

Accepted Answer

The answer of The extra revenue produced by the change...

Question 9

To earn the greatest possible profit,a firm must

Accepted Answer

To earn the greatest possible profit, a firm must maximize revenue less cost. This means that a firm should focus on increasing the revenue generated from sales while also minimizing the costs associated with producing and selling the product. This approach ensures that the firm is generating the highest possible profit from each unit sold.

Question 10

Which of the following is NOT a way to express the formula for profit?

Accepted Answer

option C includes the quantity of output, "Q", in both the revenue and cost functions, while profit depends on the difference between revenues and costs for a given quantity of output, not on the quantity of output itself. Therefore, option C is not a valid way to express the formula for profit.

Question 11

Given the inverse demand function P(Q)= 250 - Q,what is the demand function?

Accepted Answer

To find the demand function, we need to solve for Q in the inverse demand function.

P = 250 - Q 
Q = 250 - P

Therefore, the demand function is D(P) = 250 - P. Option A matches this function, making it the correct answer.

Question 12

A firm's profit is denoted by the Greek letter

Accepted Answer

In economics and finance, the letter pi (π) is often used to denote a firm's profit. This is because the symbol pi is commonly associated with mathematical calculations involving circles, and the circular nature of the symbol may evoke the idea of a continuous flow of income or revenue. Therefore, the best choice is D) Pi.

Question 13

-Refer to Figure 9.2.Whenever a CD is sold,5% of the sale goes to the artist and the remainder of the revenue goes to the record company.The graph above depicts this with R being the total revenue from sales,(0.95)R being the record company's share less the 5% given to the artist and C being the cost of producing the CD.At what quantity would the record company like to produce the CD?

Accepted Answer

The record company would like to produce the CD at quantity Q1 because this is the point where the cost of producing the CD (C) intersects with the revenue curve (0.95R), indicating the break-even point. Beyond this quantity, the record company starts making a profit.

Question 14

The simplified profit maximization equation is

Accepted Answer

The simplified profit maximization equation is Profit = Revenue - Cost, which means to maximize profits, a company needs to increase revenue and/or decrease costs. This equation is widely used in business and economics to determine the optimal level of production and pricing strategy.

Question 15

-Refer to Figure 9.2.Whenever a CD is sold,5% of the sale goes to the artist and the remainder of the revenue goes to the record company.The graph above depicts this with R being the total revenue from sales,(0.95)R being the record company's share less the 5% given to the artist and C being the cost of producing the CD.At what quantity would the artist prefer to produce the CD?

Accepted Answer

The artist prefers to produce the CD at Q2 because that is the quantity at which the artist's share of the revenue is maximized.

Question 16

A price-taking firm's variable cost function is C = Q³,where Q is the output per week.It has an avoidable fixed cost of $2,000 per week.Its marginal cost is MC = 3Q².What is the profit maximizing output if the price is P = $192?

Accepted Answer

The answer of A price-taking firm's variable cost function is...

Question 17

When a firm's demand curve is downward sloping,its marginal revenue at any positive sales quantity is ______ its price.

Accepted Answer

When a firm's demand curve is downward sloping, it has to lower the price of its product to sell additional units, which means the marginal revenue will always be less than the price. This is because the firm has to lower the price for all units sold, not just the additional units sold, in order to increase demand.

Question 18

The relationship between a firm's price and sales quantity is described by the ______ for its product.

Accepted Answer

The demand curve shows the relationship between the price of a product and the quantity of the product that consumers are willing and able to buy. As the price of a product increases, the quantity demanded generally decreases, and vice versa. Therefore, the demand curve is essential for understanding a firm's pricing strategy and the potential sales volume of a product. The supply curve shows the relationship between the price of a product and the quantity that firms are willing and able to produce and supply to the market. Marginal cost and average cost curves are related to a firm's cost structure and not directly related to the pricing and sales quantities of a product.

Question 19

When a firm's profit maximizing sales level is positive,its marginal revenue is ______ its marginal cost at that quantity.

Accepted Answer

In profit maximization, a firm's marginal revenue (MR) is equal to its marginal cost (MC) at the optimal level of output. This is because producing one more unit will add more to cost than to revenue if MR < MC, and if MR > MC, then adding more units will increase profit.

Question 20

-Refer to Figure 9.1.What is the maximum profit that can be achieved?

Accepted Answer

The answer of 
-Refer to Figure 9.1.What is the maximum...

Quiz 9: Rofit Maximization

A price-taking firm's variable cost function is C = Q³,where Q is the output per week.It has a sunk fixed cost of $2,000 per week.Its marginal cost is MC = 3Q².What is the profit maximizing output if the price is P = $192?

Suppose you own a store that sells computers.You have determined that the demand function for your computers is D(P) = 900 - 3P.At what price would you sell the computers if you wanted to sell 60 of them?

How much a firm much charge to sell any given quantity of their product is described by a(n)

Given a demand function of D(P) = 500 - 10P,what is it's inverse demand function?

Which of the following is NOT true about marginal revenue?

Suppose you own a store that sells top of the line MP3 players.You have determined that the demand function for your MP3 players is D(P) = 1200 - 4P.At what price would you sell the MP3 players if you wanted to sell 120 of them?

In which situation may a company NOT want to maximize profit?

The extra revenue produced by the change in quantity,on a per unit basis,is called

To earn the greatest possible profit,a firm must

Which of the following is NOT a way to express the formula for profit?

Given the inverse demand function P(Q) = 250 - Q,what is the demand function?

A firm's profit is denoted by the Greek letter

The simplified profit maximization equation is

A price-taking firm's variable cost function is C = Q³,where Q is the output per week.It has an avoidable fixed cost of $2,000 per week.Its marginal cost is MC = 3Q².What is the profit maximizing output if the price is P = $192?

When a firm's demand curve is downward sloping,its marginal revenue at any positive sales quantity is ______ its price.

The relationship between a firm's price and sales quantity is described by the ______ for its product.

When a firm's profit maximizing sales level is positive,its marginal revenue is ______ its marginal cost at that quantity.

-Refer to Figure 9.1.What is the maximum profit that can be achieved?

Quiz 9: Rofit Maximization

A price-taking firm's variable cost function is C = Q3,where Q is the output per week.It has a sunk fixed cost of $2,000 per week.Its marginal cost is MC = 3Q2.What is the profit maximizing output if the price is P = $192?

Suppose you own a store that sells computers.You have determined that the demand function for your computers is D(P) = 900 - 3P.At what price would you sell the computers if you wanted to sell 60 of them?

How much a firm much charge to sell any given quantity of their product is described by a(n)

Given a demand function of D(P) = 500 - 10P,what is it's inverse demand function?

Which of the following is NOT true about marginal revenue?

Suppose you own a store that sells top of the line MP3 players.You have determined that the demand function for your MP3 players is D(P) = 1200 - 4P.At what price would you sell the MP3 players if you wanted to sell 120 of them?

In which situation may a company NOT want to maximize profit?

The extra revenue produced by the change in quantity,on a per unit basis,is called

To earn the greatest possible profit,a firm must

Which of the following is NOT a way to express the formula for profit?

Given the inverse demand function P(Q) = 250 - Q,what is the demand function?

A firm's profit is denoted by the Greek letter

The simplified profit maximization equation is

A price-taking firm's variable cost function is C = Q3,where Q is the output per week.It has an avoidable fixed cost of $2,000 per week.Its marginal cost is MC = 3Q2.What is the profit maximizing output if the price is P = $192?

When a firm's demand curve is downward sloping,its marginal revenue at any positive sales quantity is ______ its price.

The relationship between a firm's price and sales quantity is described by the ______ for its product.

When a firm's profit maximizing sales level is positive,its marginal revenue is ______ its marginal cost at that quantity.

-Refer to Figure 9.1.What is the maximum profit that can be achieved?

A price-taking firm's variable cost function is C = Q³,where Q is the output per week.It has a sunk fixed cost of $2,000 per week.Its marginal cost is MC = 3Q².What is the profit maximizing output if the price is P = $192?

A price-taking firm's variable cost function is C = Q³,where Q is the output per week.It has an avoidable fixed cost of $2,000 per week.Its marginal cost is MC = 3Q².What is the profit maximizing output if the price is P = $192?