Econ 101 - Microeconomics » Fall 2022 » How Does the Firm Profit Quiz

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Question #1
The goal of the business firm is maximization of ____, and the goal of the consumer is maximization of ____.
A.   total sales; income
B.   total profit; utility
C.   total sales; utility
D.   total output; utility
Question #2
Marginal revenue is the addition to a firm's revenue from
A.   the sale of inferior output.
B.   a $1 change in price.
C.   a $1 reduction in marginal cost.
D.   a one-unit change in output.
Question #3
Total profit equals
A.   total sales revenue minus total cost.
B.   TR - TC.
C.   All of these are correct.
D.   average profit times total output.
Question #4
To find its profit-maximizing output level, a firm should operate where
A.   AVC = MC.
B.   TFC = TVC.
C.   AFC = AVC.
D.   MC = MR.
Question #5
Total profit is maximized
A.   where the difference between total revenue and total cost is greatest.
B.   at that output level where marginal revenue equals average cost.
C.   at the point where all variable costs are covered.
D.   where total revenue is at a maximum.
Question #6
If MC > MR,
A.   the total profit curve has yet to peak.
B.   output should be reduced.
C.   marginal profit is positive.
D.   there are losses.
Question #7
A grocery store sells soup for $1.50 a can, or $2.50 for two cans. To a customer, the marginal cost of buying the second can of soup is
A.   $1.25.
B.   $1.50.
C.   $2.50.
D.   $1
Question #8
The demand curve facing a firm is also the firm's
A.   average utility curve.
B.   total utility curve.
C.   total revenue curve.
D.   average revenue curve.
Question #9
The demand curve for a firm's product is also the curve showing
A.   average profits.
B.   marginal revenue.
C.   average revenue.
D.   total revenue.
Question #10
Once the profit-maximizing output where MR = MC is determined, price is set by
A.   making it equal to MR = MC.
B.   subtracting the marginal cost from total revenue.
C.   the demand curve.
D.   adding a standard markup percentage to marginal cost.
Question #11
If at optimum output of 1,000 units, the firm is incurring average variable cost per unit of $3, average fixed cost per unit of $1.50, and selling its output at $7 per unit, total profit is
A.   $7,000
B.   $250
C.   $2,500
D.   $1,500
Question #12
When a firm's fixed cost rises, its total profit curve shifts
A.   left at every profit level.
B.   up at every output level.
C.   right at every profit level.
D.   down at every output level.
Question #13
The difference between economic profit and accountant's definition of profit is that an economist's total cost counts the ____ of inputs.
A.   opportunity cost
B.   absolute value
C.   gross cost
D.   overheads
Question #14
Marginal profit is the profit
A.   that is added by a one-unit increase in total output.
B.   calculated directly from the total cost curve.
C.   earned for each dollar of cost increase.
D.   earned by a firm that is about to go out of business.
Question #15
In 1984, British Prime Minister Margaret Thatcher decided to shut down so-called "uneconomic" coal mines owned by the government. The National Union of Mineworkers protested, asserting that there was enough coal in the mines to continue current levels of production for years. Thatcher implicitly argued that her decision was economically sound because, at any practical level of output, for each "uneconomic" (or unprofitable) mine,
A.   for every input, MPP > APP.
B.   MC > AC.
C.   MC > MR.
D.   AC > MC.

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