# ch02 - File Ch02 CHAPTER 2 Optimal Decisions Using Marginal...

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File: Ch02; CHAPTER 2: Optimal Decisions Using Marginal Analysis Each question contains a code showing the section of the chapter text from which it was taken. The codes for this chapter are: Code Section 1 A Simple Model of the Firm 2 Marginal Analysis 3 Marginal Revenue and Marginal Cost 4 Sensitivity Analysis 5 Appendix MULTIPLE CHOICE 1. In the simple model of the firm, management's main tasks are to a) Set the quantity of output and estimate costs. b) Set output quantity and price. c) Set price and estimate revenue. d) Determine the scale of operation and estimate profit. e) Set advertising spending and price. ANSWER: b SECTION: 1 2. According to the model of the firm, management’s main goal is to 3. According to the law of demand, if a firm reduces the price of its good 4. According to the simple model of the firm, management can predict 2-1

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Optimal Decisions Using Marginal Analysis 5. Demand is given by Q = 600 - 30P. At price P = \$15, the firm’s unit sales are a) 100. b) 150. c) 300. d) 450. e) 600. ANSWER: b SECTION: 1 6. Demand is given by: P = 1,750 - 25Q. If the firm wishes to sell 50 units, the requisite price is 7. The firm’s demand curve is given by Q = 800 - 2P. Therefore, its inverse demand curve is 8. A firm’s total cost function is given by: C = 100 + 10Q + 2Q 2 . At Q = 10, 2-2
Chapter 2

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