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In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect _______ and _______.


A) total revenue; total cost
B) marginal revenue; marginal cost
C) total revenue; marginal cost
D) marginal revenue; total cost

E) C) and D)
F) A) and B)

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Firms operating in a market situation that creates _______, sell their product in a market with other firms who produce identical or extremely similar products.


A) a perfect monopoly
B) perfect competition
C) an oligopoly
D) a free-market

E) B) and D)
F) C) and D)

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Refer to the table below. In this instance, expansion of output Refer to the table below. In this instance, expansion of output A) causes input prices to rise as demand for inputs increases. B) leaves input prices constant as demand for inputs increases. C) causes diseconomies of scale to occur. D) occurs because of increasing returns to scale.


A) causes input prices to rise as demand for inputs increases.
B) leaves input prices constant as demand for inputs increases.
C) causes diseconomies of scale to occur.
D) occurs because of increasing returns to scale.

E) None of the above
F) A) and B)

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A

In Sam's greenhouse operation, labor is the only short term variable input. After completing a cost analysis, if the marginal product of labor is the same for each unit of labor, this will imply that


A) the average product of labor is always equal to the marginal product of labor.
B) the average product of labor is always greater that the marginal product of labor.
C) the average product of labor is always less than the marginal product of labor.
D) as more labor inputs are used, the average product of labor inputs will fall.

E) A) and B)
F) None of the above

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Briefly explain what is meant by: 1) account profit; 2) economic profit; and 3) zero economic profit.

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1) Account Profit:
Account profit, also ...

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The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 5%? The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 5%? A) $11 million B) $12 million C) $23 million D) $33 million


A) $11 million
B) $12 million
C) $23 million
D) $33 million

E) B) and D)
F) B) and C)

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Given the data provided in the table below, what will the amount of profit be for production at quantity Q) level 7? Given the data provided in the table below, what will the amount of profit be for production at quantity Q) level 7? A) -$10.00 B) zero C) -$5.00 D) $1.00 Given the data provided in the table below, what will the amount of profit be for production at quantity Q) level 7? A) -$10.00 B) zero C) -$5.00 D) $1.00


A) -$10.00
B) zero
C) -$5.00
D) $1.00

E) B) and D)
F) None of the above

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It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00, _______.


A) will likely cause the firm to reach its shutdown point immediately
B) will cause the firm to recover some of its opportunity costs
C) could likely result in a notable loss of sales to competitors
D) is a sure sign the firm is raising the given price in the market

E) A) and D)
F) None of the above

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The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 8%? The table below sets out the amount of capital needed for certain investment projects and the rate of return for each project. What is this firm's demand for physical capital if their hurdle rate is 8%? A) $1.5 million B) $2 million C) $250,000 D) $500,000


A) $1.5 million
B) $2 million
C) $250,000
D) $500,000

E) All of the above
F) A) and C)

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D

If a firm's revenues do not cover its average variable costs, then that firm has reached its _______.


A) price taking point
B) shutdown point
C) marginal point
D) opportunity margin

E) B) and D)
F) A) and B)

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Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its Refer to the table below. In this instance, confirmation that this firm is operating in a perfectly competitive market can readily be ascertained by the fact that its A) marginal cost is increasing. B) total cost is increasing. C) economic profits are zero. D) marginal revenue is constant.


A) marginal cost is increasing.
B) total cost is increasing.
C) economic profits are zero.
D) marginal revenue is constant.

E) B) and C)
F) A) and B)

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Given the data provided in the table below, what will the fixed costs equal for production at quantity Q) level 4? Given the data provided in the table below, what will the fixed costs equal for production at quantity Q) level 4? A) $35.00 B) $4.00 C) $36.00 D) $9.00


A) $35.00
B) $4.00
C) $36.00
D) $9.00

E) None of the above
F) B) and C)

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Which of the following can be thought of as an adjustment for the risks involved with respect to the cost of a firm acquiring financial capital?


A) higher retained earnings from past profits
B) cost of financial capital paid by a firm
C) imposition of hurdle rates of interest
D) tax credits for physical capital investments

E) C) and D)
F) B) and D)

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Briefly explain the nature of a perfectly competitive firm. Briefly discuss the effects of new entrants into a perfectly competitive market on existing firms that have profits in the short run.

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A perfectly competitive firm is a type o...

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The term _______ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.


A) price setter
B) business entity
C) price taker
D) trend setter

E) B) and D)
F) A) and D)

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Briefly discuss physical capital investment and long-run average cost in relation to a perfectly competitive market.

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Physical capital investment refers to th...

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When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is


A) considering opportunity costs.
B) preparing to exit operations.
C) preparing to reach its shutdown point.
D) considering capital investments.

E) C) and D)
F) None of the above

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I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company


A) must accept market price for its physical capital inputs.
B) must reduce what it pays for inputs that make up its costs of production.
C) must reduce production to encourage speculators to drive gold prices higher.
D) must alter the price of its labor inputs to maximize profits.

E) A) and B)
F) All of the above

Correct Answer

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A

Even when competitive firms are unable to calculate marginal revenue product directly, _______ will push wage rates toward the marginal revenue product of labor.


A) planned future investment in physical capital
B) the pressures of competition in the labor market
C) the marginal workers ongoing skills training
D) wages that exceed workers' net revenue product

E) A) and D)
F) All of the above

Correct Answer

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Briefly explain what a market will show if perfectly competitive firms produce at the minimum of the long-run average cost curve and explain why this happens. Briefly explain what the market will illustrate when perfectly competitive firms produce at the quantity where P = MC and explain why this happens.

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When perfectly competitive firms produce...

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