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Econ 200 - Exam 2 Study Guide

# Econ 200 - Exam 2 Study Guide - Antonio Alarcon Econ 200...

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Antonio Alarcon 03/06/07 Econ 200 – Exam 2 Study Guide Question 1 (1 point) Save Profit = Q x (MR- MC). Q x (P- AC). Q x (P- MC). Q x MR. Q x P. Question 2 (1 point) Save Suppose that marginal profit is defined to be the additional profit generated by the next unit of output. Then marginal profit equals: P-AC. P-MC. MR-AC. MR-MC. Question 3 (1 point) Save A profit-maximizing firm should choose a price-quantity combination (check all that apply): On the demand curve. That maximizes price. That minimizes average costs. That maximizes marginal revenue. That maximizes marginal revenue minus marginal cost. Question 4 (1 point) Save A firm should never produce a quantity where the ______ curve is higher than the ______ curve. Average cost; demand Demand; average cost Demand; marginal cost Average cost; marginal cost Information The next four questions refer to the diagram above, which shows a firm’s cost curves (MC,AC). The diagram also shows the firm's demand (D) and marginal revenue (MR) curves. Question 5 (1 point) Save The quantity of output that maximizes the firm's profit is closest to: 0. 25. 30. 35. 40. 45. 53. 68. Question 6 (1 point) Save The price that maximizes the firm's profit is closest to: \$2 . \$4 . \$5 . \$6 . \$8 . \$9 . \$1 0. \$1 1. \$1 2. \$1 6. Question 7 (1 point) Save The maximum profits that the firm can earn are closest to: \$2 5. \$5 0. \$7 5. \$10 0. \$12 5. \$15 0. \$17 5. \$20 0. \$30 0. \$40 0. Question 8 (1 point) Save If the firm does not want to shut down but does want to break even (earn zero profits), then the price that it should set is closest to:

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Antonio Alarcon 03/06/07 Econ 200 – Exam 2 Study Guide \$2 . \$4 . \$5 . \$6 . \$8 . \$9 . \$1 0. \$1 1. \$1 2. \$1 6. Question 9 (1 point) Save The difference between the long run and the short run is that some inputs are hard to adjust: In the long run, but they can be freely adjusted in the short run. In the short run, but all inputs are hard to adjust in the long run. In the long run, but all inputs are hard to adjust in the short run. In the short run, but they can be freely adjusted in the long run. Question 10 (1 point) Save A firm’s current capacity affects which of its average cost curves? The short run but not the long run curve. The long run but not the short run curve. Both the long run and short run curves. Neither the long run nor the short run curve. Question 11 (1 point) Save Economists usually expect a firm's long-run average cost curve to have a slightly positive slope at large quantities of output because: Bureaucracy makes large firms less efficient. It must develop a positive slope to avoid hitting zero. Large price reductions are necessary to sell the product. It is expensive to run factories at more than their intended capacity. Information The next four questions refer to this diagram, which shows a firm's demand curve (D), marginal revenue curve (MR), short run cost curves (AC, MC), and long run cost curves (LRAC, MRAC).
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