Answer f e a 45 marginal profit is the additional

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ANSWER F, E, A 45. Marginal profit is the additional profit that accrues to the firm when the output rises by one unit. ANSWER T, E, A 46. If the marginal profit of the next unit is negative, the firm should produce more output in order to  generate greater profit. ANSWER F, E, A 47. If a firm’s marginal profit is negative, it should reduce its output level. ANSWER T, M, A 48. A firm is generally more interested in marginal profits than in total profits. ANSWER F, M, A 49. A firm should use marginal analysis when making a price-output decision. ANSWER T, E, R 50. A firm that decides to make a price cut assumes that marginal profit is negative. ANSWER F, M, A 51. If marginal profit is zero, then total profit is at a maximum. ANSWER T, M, A 52. If marginal profit is zero, then average profit is at a maximum. ANSWER F, M, A 53. Profit is maximized at the output at which marginal revenue equals marginal cost. ANSWER T, M, A 54. Profit is maximized at the output at which marginal revenue exceeds marginal cost by the greatest  margin. ANSWER F, E, A 55. If total profit is maximized, then marginal cost must equal marginal revenue. ANSWER T, E, A 56. Profit maximization occurs when MC = MR. ANSWER T, E, R
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Chapter 7/Output, Price, and Profit: The Importance of Marginal Analysis 235 GENERALIZATION: THE LOGIC OF MARGINAL ANALYSIS AND MAXIMIZATION 57. Net benefit is equal to total benefit minus marginal cost. ANSWER F, M, A 58. The rule of equating marginal benefit with marginal cost is proper for economics, but it does not  describe the way in which people make non-economic decisions. ANSWER F, M, A 59. All business firms should consider their fixed costs in determining the prices they set. ANSWER F, M, A 60. When a firm’s fixed costs increase it should raise its prices in order to maximize profits. ANSWER F, E, A 61. Any change in a firm’s fixed costs will change its profit-maximizing level of output. ANSWER F, E, A 62. In the case study discussed in the chapter, the electronics firm was losing money by selling its  calculators at a price that was below average cost. ANSWER F, M, R 63. In the case study discussed in the chapter, the electronics firm was actually enhancing its profits by  selling calculators at a price that was below average cost. ANSWER T, M, R 64. Firms can make decisions using marginal analysis even if they do not know the shape of a demand  curve.
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  • Fall '98
  • Baim
  • Microeconomics, Austrian School, Neoclassical economics, Marginalism

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