Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profit-maximizing firm?
Average revenue is total revenue divided by the quantity of output. Marginal revenue is the change in total revenue from the sale of each additional unit of output. Marginal revenue is used to determine the profit-maximizing level of production, and average revenue is used to help determine the level of profits. Note that for all firms, price equals average revenue because AR=(PxQ)/Q=P. But only for a firm operating in a perfectly competitive industry does price also equal marginal revenue.
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If the Federal Reserve wants to control the level of interest rates
A) it must keep the supply of money constant. B) it must let the money supply grow at a constant rate. C) it can do so only if it also stabilizes nominal GDP. D) it will have to give up control of the money supply.
Consider a model with one endogenous regressor and two instruments. Then the J-statistic will be large
A) if the number of observations are very large. B) if the coefficients are very different when estimating the coefficients using one instrument at a time. C) if the TSLS estimates are very different from the OLS estimates. D) when you use homoskedasticity-only standard errors.
A street vendor sells a replica of a pair of designer shoes to a young woman who believes the shoes are authentic. The street vendor is engaging in
a. both moral hazard and adverse selection. b. neither moral hazard nor adverse selection. c. moral hazard, but not adverse selection. d. adverse selection, but not moral hazard.
Voluntary trade promotes economic progress because it
a. encourages individuals to become self-sufficient. b. benefits buyers at the expense of sellers. c. makes larger outputs possible as a result of specialization. d. moves goods, services and resources from people who value them more to individuals who value them less.