Table 8-3
Quantity
Price (dollars)
Total Cost (dollars)
1
10
5
2
9
8
3
8
12
4
7
17
5
6
23
Explain how much the firm shown in Table 8-3 should produce, first using total profit and then using marginal analysis.
What will be an ideal response?
Total profit is total revenue minus total cost. Total revenue is P × Q. Profit is at a maximum at Q = 3, where TR = 24, TC = 12, and profit is 12. Marginal revenue of the third unit is 6, while MC is 4. Since MR exceeds MC, one might want to produce a fourth unit. Since MR of 4 is below MC of 5, so the firm should not produce a fourth unit.
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Economic analysis is useful is resolving all of the following types of issues EXCEPT:
A. positive B. monetary policy C. normative D. fiscal policy
When money is used to purchase goods and services, it serves as a:
A. medium of exchange. B. double coincidence of wants. C. store of value. D. unit of account.
Kevin's Golf-a-Rama sells golf balls in a perfectly competitive market. At its current level of golf ball production, Kevin has marginal costs equal to $2. If the market price of golf balls is $1, Kevin should:
A. decrease the level of golf ball production. B. continue producing the current level of production. C. increase the production of golf balls. D. raise the price of its golf balls.
The base period is the
A. First year in which inflation figures were calculated. B. Absence of significant changes in the average price level. C. Time period when full employment is reached. D. Time period used for comparative analysis.