Question 1

The following table shows the total revenue (in dollars)and total cost (in dollars)from the production and sale of different units of a product.
Table 2-1
 
-Refer to Table 2-1.What is the profit-maximizing level of output for the firm?
A)3 units
B)2 units
C)1 unit
D)5 units
E)4 units

Accepted Answer

D

Question 2

A firm's demand curve is given by Q = 800 - 2P,where P = price and Q = quantity.Therefore,its inverse demand equation is _____.
A)MR = 800 - 4P
B)P = 800 - 2Q
C)P = 400 - 0.5Q
D)P = 800 - 0.5Q
E)800 = Q + 2P

Accepted Answer

C

Question 3

The demand for a product is given by P = 1,750 - 25Q,where P = price and Q = quantity.If the firm wishes to sell 50 units,each unit should be priced at _____.
A)$500
B)$400
C)$300
D)$200
E)$100

Accepted Answer

To sell 50 units, the price should be set at $500, according to the demand equation: P = 1,750 - 25Q.

Question 4

Given that a firm's inverse demand function is P = 100 - 5Q and total cost is given by C = 550 + 10Q,what is the firm's profit-maximizing level of output?
A)10 units
B)15 units
C)9 units
D)8 units
E)5 units

Accepted Answer

To maximize profit, we need to find the level of output where marginal revenue (MR) equals marginal cost (MC).

First, we need to find the firm's marginal revenue. The inverse demand function can be rewritten as Q = 20 - 0.2P, which means that the firm's total revenue (TR) is TR = P * Q = (100 - 5Q) * Q = 100Q - 5Q^2. Taking the derivative of this with respect to Q, we get the marginal revenue function: MR = 100 - 10Q.

Next, we need to find the firm's marginal cost. Taking the derivative of the total cost function with respect to Q, we get the marginal cost function: MC = 10.

Setting MR equal to MC, we get: 
100 - 10Q = 10 
Solving for Q, we get Q = 9.

Therefore, the firm's profit-maximizing level of output is 9 units.

Question 5

If a firm's profit is given by  = 36Q2 - 360Q - 150,where  = profit and Q = quantity produced,then its optimal output is _____ units.
A)12
B)5
C)2
D)20
E)36

Accepted Answer

The answer of If a firm's profit is given by...

Question 6

Which of the following is true of a firm that faces a downward sloping demand curve?
A)In order to sell more units,the firm needs to lower its price.
B)The total cost curve for the firm is also downward sloping.
C)The firm's total revenue and price are directly correlated.
D)The marginal revenue from each unit sold is constant.
E)The firm faces a constant marginal cost curve.

Accepted Answer

A downward sloping demand curve means that as the price decreases, the quantity demanded by consumers increases. Therefore, in order to sell more units, the firm needs to lower its price.

Question 7

For a downward-sloping demand curve,the associated marginal revenue curve:
A)coincides with the demand curve.
B)lies below and is parallel to the demand curve.
C)has twice the slope as the demand curve.
D)is positive for all levels of sales.
E)is parallel to the quantity axis.

Accepted Answer

The answer of For a downward-sloping demand curve,the associated marginal...

Question 8

Suppose,at its current output level,a firm's marginal profit is positive.Therefore,to maximize profit,it should:
A)decrease output until marginal profit is zero.
B)increase output because marginal revenue [MR] is less than marginal cost [MC].
C)increase both its output and its price.
D)increase output because MR is greater than MC.
E)increase output until it is producing at full capacity.

Accepted Answer

The firm's marginal profit is positive, meaning that its marginal revenue (MR) is greater than its marginal cost (MC). In order to maximize profit, the firm should continue to increase output until the point where MR=MC. At this point, the firm is producing at the optimal level where the additional revenue from producing one more unit (MR) is equal to the additional cost of producing that unit (MC). Therefore, choice D is the best option.

Question 9

According to the law of demand,if a firm reduces the price of its good:
A)consumers in the market will demand more units of the good.
B)some consumers will exit the market.
C)consumers will demand fewer units than before the price cut.
D)the quantity of goods produced and sold by the firm will decline.
E)competing firms will increase prices.

Accepted Answer

The law of demand states that as the price of a good decreases, the quantity demanded of that good will increase, holding all other factors constant. Therefore, if a firm reduces the price of its good, consumers in the market will demand more units of the good.

Question 10

What is the marginal revenue [MR] equation for a firm with the demand function P = a - bQ,where P = price and Q = quantity?
A)MR = b - Q
B)MR = a - 2bQ
C)MR = a + 2Q
D)MR = 2Q
E)MR = 2a + Q

Accepted Answer

Marginal revenue (MR) is the additional revenue that a firm earns by selling one additional unit of output. It can be found by taking the derivative of the total revenue (TR) function with respect to quantity (Q):

MR = dTR/dQ

The total revenue function for this firm is:

TR = P x Q = (a - bQ)Q = aQ - bQ^2

Taking the derivative of TR with respect to Q, we get:

dTR/dQ = a - 2bQ

Therefore, the marginal revenue equation is MR = a - 2bQ. Answer B is the correct choice.

Question 11

The following table shows the total revenue (in dollars)and total cost (in dollars)from the production and sale of different units of a product.
Table 2-1
 
-Refer to Table 2-1.What is the marginal profit of the firm from the sale of the 2nd unit of the good?
A)$9
B)$3
C)$1
D)$5
E)$21

Accepted Answer

The marginal profit is calculated as the difference in total profit from selling one more unit. If the profit from selling the first unit is $12 and the second unit is $21, the marginal profit from the second unit is $21 - $12 = $9.

Question 12

The following table shows the total revenue (in dollars)and total cost (in dollars)from the production and sale of different units of a product.
Table 2-1
 
-Refer to Table 2-1.What is the marginal revenue of the firm associated with the sale of the 5th unit of the good?
A)$55
B)$8
C)$7
D)$48
E)$4

Accepted Answer

Marginal revenue is the change in total revenue from selling one additional unit of the good. The total revenue from selling 4 units is $224 and the total revenue from selling 5 units is $231, so the marginal revenue associated with the sale of the 5th unit is $231 - $224 = $7. The best choice is C.

Question 13

A firm's total revenue function is given by R = 100 + 10Q + 2Q2,where R = revenue and Q = quantity.Which of the following is true if Q = 10?
A)The firm's total revenue is $400 and the marginal revenue is $10.
B)The firm's marginal revenue is constant at $40.
C)The average revenue of the firm is $50.
D)The total revenue of the firm is $500.
E)The marginal revenue of the firm is $50.

Accepted Answer

The marginal revenue is the derivative of the total revenue function with respect to Q. The derivative is MR = 10 + 4Q. Substituting Q = 10 gives MR = 10 + 4(10) = 50.

Question 14

Which of the following correctly defines marginal cost?
A)Marginal cost is the addition made to fixed cost when an extra unit is produced.
B)Marginal cost is the additional cost of producing an extra unit of output.
C)Marginal cost is the additional cost of increasing the scale of production in the long run.
D)Marginal cost is the difference between price and marginal revenue for the last unit sold.
E)Marginal cost is the same as the firm's variable cost at all levels of output.

Accepted Answer

Marginal cost is the additional cost of producing an extra unit of output. This includes both variable and fixed costs. It is the cost of the last unit produced and is calculated by dividing the change in total cost by the change in output.

Question 15

According to the model of the firm,the management's main goal is to:
A)increase revenue from sales.
B)maximize profit.
C)maximize its market share.
D)minimize its variable cost per unit.
E)maintain a steady and predictable growth in earnings.

Accepted Answer

According to the model of the firm, the main goal of management is to maximize profit. This means that they must try to earn as much revenue as possible while also keeping costs as low as possible in order to increase profits. While maintaining a steady growth in earnings and minimizing variable costs per unit are important objectives, they ultimately serve the overarching goal of maximizing profit. Similarly, increasing revenue and market share are also important, but not necessarily the primary goal.

Question 16

Which of the following correctly defines marginal revenue?
A)Marginal revenue is the price at which the firm sells the last unit of the good.
B)Marginal revenue is the change in revenue from a unit increase in the price of the good.
C)Marginal revenue is the additional revenue from a unit increase in output and sales.
D)Marginal revenue is the additional revenue earned from an increase in demand for the good.
E)Marginal revenue is the difference between price and marginal cost for the last unit sold.

Accepted Answer

Marginal revenue is defined as the additional revenue that a firm receives from selling one more unit of a good or service. It is calculated as the change in total revenue divided by the change in quantity sold. Choices A, B, D, and E do not accurately describe this concept.

Question 17

Suppose a firm's profit is given by the equation $\pi$  = -200 + 80Q - 0.2Q2,where $\pi$  = profit and Q = quantity.Which of the following is true?
A)The firm's marginal profit [M$\pi$] is given by the equation: M$\pi$ = 80 - 0.2Q.
B)The firm's profit-maximizing output is Q = 400.
C)The firm's profit-maximizing output is Q = 200.
D)The firm's marginal profit [M$\pi$] is given by the equation: M$\pi$ = 80 - 2Q.
E)The firm's profit-maximizing output is Q = 800.

Accepted Answer

To find the profit-maximizing output, set the derivative of the profit function (marginal profit) to zero: d/dQ = 80 - 0.4Q = 0. Solving for Q gives Q = 200.

Question 18

The following table shows the total revenue (in dollars)and total cost (in dollars)from the production and sale of different units of a product.
Table 2-1
 
-Refer to Table 2-1.What is the firm's profit from the sale of the 3rd unit of the good?
A)$13
B)$11
C)$12
D)$39
E)$27

Accepted Answer

The answer of The following table shows the total revenue...

Question 19

Suppose a firm's inverse demand function is P = 40 - 8Q.What is the firm's revenue function? A)R = 40Q - 8Q² B)R = 40 - 16Q C)R = -8Q D)R = 40/Q - Q E)R = 5 - Q

Accepted Answer

The revenue function R is calculated by multiplying the price P by the quantity Q. Given the inverse demand function P = 40 - 8Q, the revenue function is R = P * Q = (40 - 8Q) * Q = 40Q - 8Q^2.

Question 20

The demand for a product is given by Q = 600 - 30P,where P = price and Q = quantity.At P = $15,the firm sells _____ units.
A)100
B)150
C)300
D)450
E)600

Accepted Answer

Substitute P = $15 into the demand equation Q = 600 - 30P to find Q = 600 - 30(15) = 600 - 450 = 150 units.

Quiz 2: Optimal Decisions Using Marginal Analysis

The following table shows the total revenue (in dollars) and total cost (in dollars) from the production and sale of different units of a product. Table 2-1 -Refer to Table 2-1.What is the profit-maximizing level of output for the firm?

A firm's demand curve is given by Q = 800 - 2P,where P = price and Q = quantity.Therefore,its inverse demand equation is _____.

The demand for a product is given by P = 1,750 - 25Q,where P = price and Q = quantity.If the firm wishes to sell 50 units,each unit should be priced at _____.

Given that a firm's inverse demand function is P = 100 - 5Q and total cost is given by C = 550 + 10Q,what is the firm's profit-maximizing level of output?

If a firm's profit is given by  = 36Q2 - 360Q - 150,where  = profit and Q = quantity produced,then its optimal output is _____ units.

Which of the following is true of a firm that faces a downward sloping demand curve?

For a downward-sloping demand curve,the associated marginal revenue curve:

Suppose,at its current output level,a firm's marginal profit is positive.Therefore,to maximize profit,it should:

According to the law of demand,if a firm reduces the price of its good:

What is the marginal revenue [MR] equation for a firm with the demand function P = a - bQ,where P = price and Q = quantity?

The following table shows the total revenue (in dollars) and total cost (in dollars) from the production and sale of different units of a product. Table 2-1 -Refer to Table 2-1.What is the marginal profit of the firm from the sale of the 2nd unit of the good?

The following table shows the total revenue (in dollars) and total cost (in dollars) from the production and sale of different units of a product. Table 2-1 -Refer to Table 2-1.What is the marginal revenue of the firm associated with the sale of the 5th unit of the good?

A firm's total revenue function is given by R = 100 + 10Q + 2Q2,where R = revenue and Q = quantity.Which of the following is true if Q = 10?

Which of the following correctly defines marginal cost?

According to the model of the firm,the management's main goal is to:

Which of the following correctly defines marginal revenue?

Suppose a firm's profit is given by the equation $\pi$ = -200 + 80Q - 0.2Q2,where $\pi$ = profit and Q = quantity.Which of the following is true?

The following table shows the total revenue (in dollars) and total cost (in dollars) from the production and sale of different units of a product. Table 2-1 -Refer to Table 2-1.What is the firm's profit from the sale of the 3rd unit of the good?

Suppose a firm's inverse demand function is P = 40 - 8Q.What is the firm's revenue function?

The demand for a product is given by Q = 600 - 30P,where P = price and Q = quantity.At P = $15,the firm sells _____ units.