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Question
Define the terms marginal revenue and marginal cost. What action should a firm take if its marginal revenue exceeds its marginal cost? Explain.Answer
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Related questions
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Which of the following would cause a fall in the price of video tape rentals?
a.A new nationwide video rental chain opens.
b.Movie theaters raise their prices.
c.The royalties paid to movie actors increase.
d.The price of video cassette recorders (VCRs) falls.
Q:
In a supply-demand diagram, the law of supply is illustrated by
a.shifting the supply curve to the right as suppliers expand production and to the left as they contract production.
b.drawing the supply curve so that it slopes upward.
c.showing how the equilibrium point changes as the supply curve shifts.
d.drawing a vertical line at the quantity that producers choose to supply.
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Consider a demand curve for reckless driving, for which the "price of reckless driving" is interpreted as the probability of having a fatal accident. When could safer cars lead to an increase in total number of driver fatalities?
a.Always.
b.Never.
c.When the demand curve is relatively flat.
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If the supply of hotel rooms falls and all other relevant factors remain unchanged, then,
a.the demand for hotel rooms will fall.
b.the quantity demanded of hotel rooms will fall.
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If a rise in supply and a rise in demand occur at the same time, then we know that the price must also rise.
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When a sales tax of 20 per soda is imposed on soda consumption, the supply curve for soda shifts down by precisely 20 per soda.
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When the law of supply holds, an increase in the price of a product will cause producers to increase the quantity they wish to sell.
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As defined by economists, the supply of corn refers to the number of bushels of corn that farmers bring to the market.
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Demand and Total Cost of ProductionThe following questions refer to the following tables which show the demand for a firm's product and the firm's total cost of production.DemandTotal CostQuantityPriceQuantityDollars0 units$35 per unit0 units$013014225211320321415434510550Refer to Demand and Total Cost of Production. According to the equimarginal principle, how many units should the firm produce in order to maximize its profit?a. 2 units.b. 3 units.c. 4 units.d. 5 units.
Q:
Demand and Total Cost of ProductionThe following questions refer to the following tables which show the demand for a firm's product and the firm's total cost of production.DemandTotal CostQuantityPriceQuantityDollars0 units$35 per unit0 units$013014225211320321415434510550Refer to Demand and Total Cost of Production. The marginal revenue received from selling the fourth unit isa. $60 per unit.b. $15 per unit.c. $13 per unit.d. $0 per unit.
Q:
When should a firm increase its production?
a. When it is earning a positive profit.
b. When its revenues are too low to cover the firm's fixed costs.
c. When there is a fall in the price of its product.
d. When its marginal revenue exceeds its marginal cost.
Q:
If an activity is worth pursuing at all, then it should be pursued up to the point where
a. total cost equals total benefit.
b. average cost equals average benefit.
c. marginal cost equals marginal benefit.
d. sunk costs equal zero.
Q:
If an activity is worth pursuing at all, then the only information the decision maker needs to make a choice is
a. total benefits.
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c. variable costs.
d. fixed costs.
Q:
The Marginal Benefit of consuming an additional unit of a good tends to increase as the number of units consumed increases.
Q:
Marginal Revenue measures the slope of the Demand curve.
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The marginal cost of producing tea can be measured in dollars per pound of tea.
Q:
In order to isolate the substitution effect of a price increase, a consumer
a. must be given a lower price on the other good so that he can achieve his original indifference curve.
b. must be given enough of the other good so that his consumption of that good is not influenced.
c. must be given enough additional income to allow him to achieve his original indifference curve.
d. must be given enough additional income to allow him to purchase the original quantity of the good.
Q:
When the price of a good rises, the resulting change in quantity demanded due solely to the decline in your income's purchasing power is called the
a. Giffen-good phenomenon.
b. law of demand.
c. substitution effect.
d. income effect.
Q:
If a person's income rises and they do not increase their consumption, we can conclude that
a. the good is not inferior.
b. their income elasticity of demand is zero.
c. the good is not normal.
d. no conclusions can be made without knowing the person's initial income and consumption levels.
Q:
To construct an ordinary demand curve for good X,
a. change the price of good X in the consumer choice diagram and observe the change in the quantity of good X among the optimum market baskets.
b. change the prices of both goods in the consumer choice diagram and observe the change in the quantity of good X among the optimum market baskets.
c. change the price of good Y in the consumer choice diagram and observe the change in the quantity of good X among the optimum market baskets.
d. change the consumer's income in the consumer choice diagram and observe the change in the quantity of good X.
Q:
What types of goods have downward-sloping Engel curves?
a. Normal goods only.
b. Inferior goods only.
c. Giffen goods only.
d. All types of goods.
Q:
If the cross-price elasticity for oranges with respect to apples is 1.2 and the price of apples increase by 5%, then we can expect the quantity demanded of oranges to decrease by 6%.
Q:
If a consumer demands the same (positive) amount of a good no matter what their income, then the income elasticity is also positive.
Q:
The (ordinary) demand curve for a normal good must be downward sloping.
Q:
In a two-good world, one good-but not both-can be inferior.
Q:
The Engel curve contains information that is not found in the indifference curve diagram.
Q:
If an Engel curve is downward sloping, then one of the two goods must be inferior.
Q:
Parallel shifts in the budget line are considered when deriving the demand curve for a good.
Q:
A Paasche price index makes price changes seem better for the consumer than they really are.
Q:
The budget line is steep when X in inexpensive relative to Y.