Explain why a firm maximizes its total profits by producing where MC = MR. To answer this question completely, you should explain why output levels greater than and less than the level where MC = MR do not maximize profits.
What will be an ideal response?
If the firm produces more than the output where MC = MR, MC > MR and the firm would be experiencing losses on the additional units (i.e., total profits would be reduced). If the firm produces less than the output where MC = MR, MC < MR and further increases in the rate of output will increase total profits. It follows that profits are maximized where MC = MR.
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The natural rate hypothesis states that
A) it is natural for the unemployment rate to be less than the natural unemployment rate. B) changes in the inflation rate temporarily change the natural unemployment rate. C) it is natural for the unemployment rate to exceed the inflation rate. D) only natural economic policies can bring a permanent reduction in the unemployment rate. E) changes in the inflation rate temporarily change the unemployment rate.
Government expenditures included in the expenditure approach to GDP include ________
A) Social Security and education B) net exports C) buying a new bomber D) Both answers A and C are correct.
Monopolies can make an economic profit in the long run because of
A) rent seeking by competitors. B) the elastic demand for the monopoly's product. C) the cost-savings gained by the monopoly. D) barriers to enter the monopoly's market.
Refer to Table 4-14. The equations above describe the demand and supply for Pauline's Pickled Pomegranates. What are the equilibrium price and quantity (in thousands) for Pauline's Pickled Pomegranates?
A) $15 and 45 thousand B) $30 and 15 thousand C) $60 and 20 thousand D) $20 and 10 thousand