CLEP Microeconomics chapter practice4 questions

18 Profit and the MR=MC Rule

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 4

A firm's marginal revenue for the next four units is 30, 24, 18, and 12. Marginal cost is 10, 16, 20, and 26. How many of these units should the firm produce?

The first two units have marginal revenue at least as large as marginal cost. The third costs 20 but adds only 18 of revenue.
Show answer and explanation

E. Two

The first two units have marginal revenue at least as large as marginal cost. The third costs 20 but adds only 18 of revenue.

Question 2

Question 2 of 4

A firm sells 80 units for 25 each. Average total cost is 21. Economic profit is

Profit is (P-ATC)Q=(25-21)(80)=320$.
Show answer and explanation

E. $320

Profit is (P-ATC)Q=(25-21)(80)=320$.

Question 3

Question 3 of 4

Which expression measures economic profit?

Economic profit equals total revenue minus all explicit and implicit economic costs.
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B. TR-TC

Economic profit equals total revenue minus all explicit and implicit economic costs.

Question 4

Question 4 of 4

A profit-maximizing firm is producing where MR=MC. Under the usual conditions, which statement must be true?

At the optimum, expanding would add more cost than revenue and contracting would forgo units whose revenue covers cost. Profit need not be positive.
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D. A small change in output cannot increase the firm's profit.

At the optimum, expanding would add more cost than revenue and contracting would forgo units whose revenue covers cost. Profit need not be positive.

Quiz complete