Why should a firm not produce more than the rate of output at which marginal revenue equals marginal cost?
What will be an ideal response?
A firm maximizes its total profits when producing the rate of output at which marginal revenue equals marginal cost. If the firm produces more than this rate of production, then marginal cost will exceed marginal revenue, meaning that total profits decrease as a result of a higher production rate. Therefore, the profit-maximizing firm should not produce more than the rate of production at which marginal revenue equals marginal cost.
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The theory of comparative advantage suggests that nations should produce a good if they:
a. have the lowest opportunity cost. b. have the lowest wages. c. have the most resources. d. can produce more of the good than any other nation.
The exchange rate of the Euro in terms of the US Dollar is currently:
(a) At parity. (b) Below parity. (c) Above parity. (d) Undefined.
Suppose a business firm dumps its used car batteries into a river.
A. The company's actions constitute an external cost. B. The company's actions constitute an external benefit. C. The company's actions would be an example of the market system efficiently allocating resources. D. The company's actions damage no one but itself.
Considering a put option, an increase in the strike price:
A. causes the intrinsic value of the option to increase if it is above zero. B. makes the option worthless. C. causes the intrinsic value of the option to decrease if it is above zero. D. causes the value of the option to decrease.