If profits depend on both how much is produced (output) and on the level of advertising, then a profit-maximizing firm should choose the levels of output and advertising at which
A. the addition to total revenue of the last unit of advertising equals the addition to total cost of the last unit of advertising.
B. the marginal revenue of output equals the marginal cost of output.
C. total revenue equals total cost for both output and advertising.
D. both a and b
E. both b and c
Answer: D
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If the market price is $2 and a perfectly competitive firm is producing 1,000 units and the marginal cost to produce the 1,000th unit is $2, which of the following is true?
A) The difference between marginal revenue and marginal cost (MR - MC) for the 500th unit is positive. B) The firm is not maximizing profit. C) The difference between marginal revenue and marginal cost (MR - MC) for the 500th unit is negative. D) The difference between marginal revenue and marginal cost (MR - MC) for the 500th unit is zero.
Which one of the following is not a component of GDP, as measured using the expenditure approach?
a. Personal consumption. b. Exports. c. Durable goods. d. Government spending. e. Interest.
Which of the following will reduce the velocity of circulation of the money stock?
a. The inflation rate increases. b. The interest rate falls. c. Credit cards are used more frequently. d. More employees are paid once a week instead of once a month.
Suppose the cost of milk rose 100 percent from 1990 to 2010, and average prices for the economy rose 133 percent. Relative to others, people who purchased milk experienced a:
A. Lower real income as a result of the price effect. B. Higher real income as a result of the price effect. C. Lower real income as a result of the wealth effect. D. Higher real income as a result of the income effect.