1) The firm maximizes profit by producing the output level at which____.

A) Total revenue equals total cost

B) Total revenue minus total cost is greatest

C) Marginal revenue minus marginal cost is greatest

D) Total revenue is as high as possible

2) While economists can explain why there are payments for land, labor and capital, they have not been able to explain why there are profits (TRUE/FALSE)

3) When MR and MC cross at two places, the profit-maximizing output level is the one at which the MC curve crosses the MR curve from above (TRUE/FALSE)

4) Refer to the data in Figure 8-1 in the text, derived from the demand curve facing the firm. For this firm, as output increases from 4 to 5 to 6 to 7, then ___

A) marginal revenue increases

B) marginal cost decreases

C) marginal cost increases

D) marginal cost decreases

E) total revenue remains unchanged

5) Economic profit can be defined as total revenue minus all the explicit and implicit cost to the firm (TRUE/FALSE)

6) Refer to the data in Figure 8-1 in the text, derived from the demand curve facing the firm. At which output level or levels could this firm make a positive economic profit.

A) 4

B) 5

C) 6

D) All of these

7) The demand curve facing the firm shows us, for any given output level _____

A) the maximum price the firm can charge

B) total revenue

C) total cost

D) the minimum price the firm can charge

E) None of these

8) According to the marginal approach to profit, a firm should take any action that ____.

A) increases marginal revenue

B) adds more to revenue than to cost

C) increases total revenue

D) decreases total cost

E) decreases marginal cost

9) A useful rule for deciding whether to increase ouput is to compare the gain in revenue with the average cost of production. (TRUE/FALSE)