Which of the following offers the best explanation of why "marginal revenue equals marginal cost" is the rule that indicates the profit-maximizing output level?
A. If output were reduced from the profit-maximizing level, then the firm would be gaining marginal revenue that exceeds marginal cost, and thus increasing the level of profit.
B. If output were increased from the profit-maximizing level, then the firm would be gaining marginal revenue that is less than the marginal cost incurred in producing this additional unit, and thus reducing the level of profit.
C. Because the firm colludes with other similar firms to set price equal to marginal cost.
D. The marginal revenue is equal to the marginal cost at all levels of output for a perfectly competitive firm.
Answer: B
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Compare and contrast the arguments favoring active versus passive policy making
What will be an ideal response?
In August 2007, Sun Trust Bank has $83 million in loans and $114 million in M1 deposits. If Sun Trust is holding $4 million in reserves, the bank's reserve ratio is
A) $31 million. B) 4.8 percent C) 3.5 percent. D) 72.8 percent.
The presence of negative externalities leads to a misallocation of societal resources because: a. whenever external costs are imposed on outside parties, the good should not be produced at all
b. less of the good than is ideal for society is produced. c. there are some costs associated with production that the producer fails to take into consideration. d. the government always intervenes in markets when negative externalities are present, and the government is inherently inefficient.
An appreciation in the value of the U.S. dollar would
a. encourage foreigners to make more investments in the United States. b. encourage U.S. consumers to purchase more foreign-produced goods. c. increase the number of dollars that could be purchased with the euro. d. discourage U.S. consumers from traveling abroad.