1) Maximum profit can be shown on a diagram using ?
a. the MR and MC curves
b. the AC and AR curves
c. the AC and MC curves
d. the MR and AR curves
2) Marginal revenue is ?
a. the additional profit the firms earns when it sells an additional unit of output
b. the difference between total revenue and total cost
c. The ratio of total revenue to quantity.
d. the added revenue that a firm takes in when it increases output by one additional unit.
3) The formula for average fixed costs is ?
b. TFC – q
4) The rate at which a firm can substitute capital for labour and hold output constant is the ?
a. marginal rate of factor substitution
b. marginal rate of substitution
c. law of diminishing marginal returns.
d. marginal rate of production
5) Most empirical studies show that firm’s cost curves ?
a. slope up to the right
b. are U-shaped
c. slope down to the right
d. slope down to the right and then level off.
6) Engineers for the All-Terrain Bike Company have determined that a 15% increase in all inputs will cause a 15% increase in output Assuming that input prices remain constant, you correctly deduce that such a change will cause ________ as output increases?
a. average costs to remain constant
b. average costs to decrease
c. average costs to increase
d. marginal costs to increase
7) Which of the following is a correct statement about the relationship between average product (AP) and marginal product (MP) ?
a. If TP is declining, then AP is negative
b. If AP = MP, then total product is at a maximum.
c. If AP exceeds MP then AP is falling
d. If AP is at a maximum, then MP is also,
8) The short run, as economists use the phrase, in characterized by ?
a. at least one fixed factor of production and firms neither leaving nor entering the industry.
b. no variable inputs – that is, all of the factors of production are fixed
c. all inputs being variable
d. a period where the law of diminishing returns does not hold
9) Which of the following is most likely to be a variable cost for a firm ?
a. The franchiser’s fee that a restaurant must pay to the national restaurant chain
b. The payroll taxes that are paid on employee wages.
c. The monthly rent on office space that it leased for a year
d. The interest payments made on loans.
10) Profit-maximizing firms want to maximize the difference between ?
a. marginal revenue and marginal cost.
b. total revenue and total cost
c. total revenue and marginal cost
d. marginal revenue and average cost