167 explain the rules for finding maximum profit

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167. Explain the rules for finding maximum profit using total revenue and total cost and marginal  revenue and marginal cost. ANSWER E, A Maximum profit is where total revenue exceeds total cost by the maximum amount. If the firm were  to increase output beyond this point, the addition to TC – MC would exceed the addition to TR –  MR. So the firm should stop once MC catches up to MR. That is, to maximize profit, stop at the  output where MR = MC. 168. Michael Jordan averaged 35 points per game over a 100-game season. During the playoff round of  10 games, he averaged 50 points, and in the five-game championship series, he led the Chicago  Bulls to victory, averaging 40 points. For the entire season, how many points did Jordan score, what  was his average, and did the championship series pull his previous average up or down? ANSWER E, A Over the regular season, Jordan scored 35  ×  100 = 3,500 points. He added 500 points in the playoff,  for a 4,000-point total over 110 games. His average rose to 36.3. Since his “marginal” 40-point  performance in the championship was above his average of 36.3, he pulled up his average. The  season total was 4,200 points; his average was 4,200/115 = 36.5. 169. “As long as total revenue slopes up, marginal revenue must slope up also.” Explain whether this  statement is true or false. ANSWER M, A Marginal revenue is the slope of total revenue. Marginal revenue typically slopes down, since total  revenue typically increases, but at a decreasing rate. 170. The state is considering adding a satellite campus to its major university. How can marginal analysis  assist, even though the university does not attempt to maximize profits? ANSWER E, A Marginal analysis provides the general rule that something is worth doing as long as marginal  benefits exceed marginal costs, and one should stop where marginal benefits equal marginal costs.  The state should compare the benefits of providing its citizens with another campus versus the costs  associated with any alternative courses of action. If marginal benefits exceed marginal costs, then  the state should proceed with the satellite campus plans.
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Chapter 7/Output, Price, and Profit: The Importance of Marginal Analysis 255 171. The phone network says it loses money on local calls, because the $20 average monthly bill does  not cover its average cost of $30. It estimates that $18 of costs are directly related to local service,  with $12 the share from overall expenses (overhead). Why would the phone network be willing to  operate if it is losing money?
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