ECON 200 Lecture 23: Econ 200,University of Arizona,Readings-Notes(p23)

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ivorysea-lion839

30 Aug 2018

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University of Arizona

Department

Economics

Course

ECON 200

Professor

ALL

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ECON 200 Full Course Notes

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Average revenue - total revenue divided by the quantity sold. Marginal revenue - the change in total revenue from an additional unit sold. Average revenue tells us how much revenue a firm receives for the typical unit sold. For all types of firms, average revenue equals the price of the good. As long as marginal revenue exceeds marginal cost, increasing the quantity produced raises profit. The marginal-cost curve crosses the average-total-cost curve at the minimum of average total cost. For a competitive firm, the price equals both the firm"s average revenue (ar) and its marginal revenue (mr) If marginal revenue is greater than marginal cost, the firm can increase profit by increasing production. If marginal revenue is less than marginal cost, as it is at , the firm can increase profit by reducing production. If marginal revenue is greater than marginal cost, the firm should increase its output.

Related Questions

1.Profit maximizing firms should increase output to the point where:

a.Total revenue is largest

b.Total revenue just exceeds total costs

c.An increase in revenue is just offset by an increase in cost.

d.Fixed costs are covered

e.Total cost is minimized

2.The Golden Rule of Output Determination for a perfectly competitive firm is to:

a.Choose the output rate at which price is greatest.

b.Choose the output rate at which marginal revenue equals marginal cost.

c.Produce to the point of diminishing marginal returns

d.Produce until total revenue exceeds total cost.

e.Choose the output rate at which total cost is the lowest.

3.Which of the following conditions would indicate that a perfectly competitive firm should expand output to increase its profit?

a.Marginal cost equals average cost

b.Total cost exceeds marginal cost

c.Price exceeds marginal cost

d.Total revenue exceeds total costs

e.Total revenue equal price

4. It would not pay a firm to produce anything in the short run if the price were:

a.Above average total costs

b.Equal to marginal cost and above the average variable cost.

c.Equal to total revenue divided by output

d.Below average variable cost

e.Below marginal average cost

rubydolphin297

Q1. Average total cost is equal to
a. AFC + AVC
b. AFC/total output
c. AFC/AVC
d. AVC/AFC

Q2. As output increases, the ATC
a. increases
b. decreases
c. remains constant
d. falls and then rises

Q3. Total profit is equal to
a. total revenue minus total cost
b. total revenue minus explicit cost
c. total revenue minus variable cost
d. total revenue minus marginal cost

Q4. Marginal cost crosses the
a. AVC curve at the highest point of the AVC curve
b. ATC curve at the lowest point of the ATC curve
c. AFC curve at the lowest point of the AFC curve
d. ATC curve at the highest point of the ATC curve

Q5. Wages paid are an example of an explicit cost of doing business.
a. true
b. false

Q6. Any revenue over and above total cost is labeled economic profit.
a. true
b. false

Q7. If the selling price of a product is $10, the average total cost is $8, and total sales are 5,000 units, the total profit will be
a. $5,000
b. $8,000
c. $10,000
d. $20,000

Q8. Whenever marginal revenue exceeds marginal cost,
a. profit declines if output increases
b. profit increases if output increases
c. losses increase if output increases
d. marginal revenue must be rising

Q9. Under perfectly competitive conditions, marginal revenue is
a. greater than average revenue
b. equal to average revenue
c. less than average revenue
d. equal to the average variable

Q10. A firm's break-even point occurs where
a. marginal revenue equals marginal cost
b. marginal revenue equals average variable cost
c. total revenue equals total cost
d. total revenue equals total variable cost

Q11. The addition to total output resulting from using one more unit of a productive resource is the
a. average product
b. marginal input
c. total product
d. marginal product

Q12. Unlike a firm in pure competition, a monopolist may be able to
a. block the entry of new firms into the industry
b. continue to earn economic profits in the long run
c. earn economic profits in the short run
d. both (a) and (b)

Q13. Producer surplus is the difference between the price the firm is willing to sell its goods and the price it actually receives.
a. true
b. false

Q14. In the long run, under conditions of perfect competition, market forces come into play to
a. enhance profits
b. increase demand
c. eliminate profits
d. separate MR and AR

Q15. Consumer surplus is the area above the demand curve and below the equilibrium price.
a. true
b. false

Q16. Under perfect competition, market price is determined by market demand and supply.
a. true
b. false

Q17. The more that firms advertise, the closer they get to perfect competition.
a. true
b. false

Q18. Perfect competition assumes that a producer is interested in maximizing profit.
a. true
b. false

Q19. In the long run, under conditions of perfect competition, the buyer will eventually be able to buy the product at a
a. price equal to the lowest point on the ATC curve past the optimal scale of operation
b. price below cost
c. price equal to the lowest point on the ATC curve at the optimal scale of operation
d. discount

Q20. The lowest possible ATC curve is attained at the optimal scale of output.
a. true
b. false

Answer the following questions pertaining to monopolist production.

1) If a monopolist is producing in the inelastic portion of its demand curve, which of the following will occur if the monopolist decreases its price?

a. Marginal revenue will decrease, but profits will increase.

b. Marginal revenue will increase, but profits will decrease.

c.Total revenue will decrease, but profits will increase.

d.Both total revenue and profits will decrease.

e. Both total revenue and profits will increase.

2) Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?

a.The firm's price is equal to its average revenue.

b.The firm cannot affect the market price for its good.

c.It is difficult for other firms to enter the industry.

d. The demand for the firm's product is unit elastic.

e.The firm must lower its price in order to sell more of its product.

3) Monopolies are inefficient for which of the following reasons?

a. They produce too little of the good.

b.They produce too much of the good.

c. They do not produce an output level at which marginal cost equals marginal revenue.

d. The marginal cost of producing the good is too low.

e. The firm is too large.

4) Which of the following is necessarily true of the profit-maximizing equilibrium of a monopolist who sets a single price?

a. Price equals average total cost.

b. Price is greater than the marginal cost.

c. Average total cost is at its minimum level.

d. Marginal revenue is greater than marginal cost.

e. Marginal cost is minimized.

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ECON 200 Lecture 23: Econ 200,University of Arizona,Readings-Notes(p23)

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